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Natural Disasters: Exposure and Underinsurance


  • Céline Grislain-Letrémy


The insurance coverage for natural disasters remains low in many exposed areas, particularly in Latin America and the Caribbean. Reduced availability or unaffordability of insurance are commonly identified as the primary causes for this low insurance coverage. The French overseas departments provide a rare example of a well-developed and regulated supply of natural disaster insurance. They offer an exceptional opportunity to analyze the demand-side determinants of insurance coverage in these highly exposed regions. Based on unique household-level micro-data, I estimate a structural model of insurance supply and demand. Because my data set combines detailed information on both insured and uninsured households, I can analyze the extensive margin in the insurance market, that is, the insurance take-up. I show that the low insurance take-up rate in the French overseas departments is mainly due to uninsurable housing and the anticipation of assistance.

Suggested Citation

  • Céline Grislain-Letrémy, 2018. "Natural Disasters: Exposure and Underinsurance," Annals of Economics and Statistics, GENES, issue 129, pages 53-83.
  • Handle: RePEc:adr:anecst:y:2018:i:129:p:53-83
    DOI: 10.15609/annaeconstat2009.129.0053

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    More about this item


    Natural Disasters; Insurance; Disaster Aid;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis


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