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Flood Insurance Coverage in the Coastal Zone

  • Craig E. Landry
  • Mohammad R. Jahan‐Parvar

We explore behavior and test theory regarding the determinants of flood insurance coverage in the coastal zone using household-level data for nine southeastern counties. We use Tobit regression models to assess the importance and magnitude of insurance cost, risk factors, community characteristics, and household attributes on flood insurance purchase for residential building structures. Overall estimates indicate price inelastic demand, though subsidized policyholders are more sensitive to price and hold greater flood insurance coverage (controlling for value of asset at risk). We find support for rational choice in the coastal zone, with flood insurance coverage positively correlated in the level of flood risk. We find evidence that coastal erosion risk effects flood insurance demand, and that community level erosion hazard mitigation projects influence flood insurance holdings, with shoreline armoring appearing to act as a substitute and beach replenishment appearing to act as a complement.

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Article provided by The American Risk and Insurance Association in its journal The Journal of Risk and Insurance.

Volume (Year): 78 (2011)
Issue (Month): 2 (06)
Pages: 361-388

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Handle: RePEc:bla:jrinsu:v:78:y:2011:i:2:p:361-388
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  1. Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
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  9. Browne, Mark J & Hoyt, Robert E, 2000. " The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
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  11. Luigi Guiso & Tullio Jappelli, 1998. "Background Uncertainty and the Demand for Insurance Against Insurable Risks," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 23(1), pages 7-27, June.
  12. Warren Kriesel & Craig Landry, 2004. "Participation in the National Flood Insurance Program: An Empirical Analysis for Coastal Properties," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 405-420.
  13. Amemiya, Takeshi, 1973. "Regression Analysis when the Dependent Variable is Truncated Normal," Econometrica, Econometric Society, vol. 41(6), pages 997-1016, November.
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