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A Catastrophe Insurance System for the European Union

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  • Nektarios Milton

    (University of Piraeus, Greece)

Abstract

This paper proposes an integrated risk management plan for catastrophe risks in the European Union, consisting of three layers. The private markets would have the first layer of responsibility, while the National Catastrophe Insurance Organizations would represent the second layer. This layer would in turn be supported by the European Group of National Catastrophe Organizations (EUROCAT), a new organization operating under the auspices of the European Commission. An approach that utilizes a pan-European reinsurance program is proven to be the most efficient solution for minimizing the total cost of catastrophe risks in the European Union. EUROCAT would be a reinsurer of last resort and provide reinsurance to qualified state or regional catastrophe insurance funds. Member-state funds would be required to adopt adequate disaster response and management mechanisms and enforce reasonable building code, land use, and mitigation efforts to minimize the amount of insured losses. As the reinsurance premiums charged by EUROCAT would be risk-based, the pricing mechanism would be used to encourage active development and enforcement of these standards.

Suggested Citation

  • Nektarios Milton, 2011. "A Catastrophe Insurance System for the European Union," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 5(2), pages 1-22, July.
  • Handle: RePEc:bpj:apjrin:v:5:y:2011:i:2:n:6
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    References listed on IDEAS

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    1. Froot, Kenneth A., 2001. "The market for catastrophe risk: a clinical examination," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 529-571, May.
    2. Knut K. Aase, 2007. "Equilibrium in Marine Mutual Insurance Markets with Convex Operating Costs," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 239-268.
    3. Pierre Picard, 2008. "Natural Disaster Insurance and the Equity-Efficiency Trade-Off," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(1), pages 17-38.
    4. Cummins, J. David & Doherty, Neil & Lo, Anita, 2002. "Can insurers pay for the "big one"? Measuring the capacity of the insurance market to respond to catastrophic losses," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 557-583, March.
    5. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    6. J. David Cummins, 2008. "CAT Bonds and Other Risk-Linked Securities: State of the Market and Recent Developments," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 23-47, March.
    7. Robert W. Klein & Shaun Wang, 2009. "Catastrophe Risk Financing in the United States and the European Union: A Comparative Analysis of Alternative Regulatory Approaches," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 607-637.
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    Cited by:

    1. Aglaia Petseti & Milton Nektarios, 2012. "Proposal for a National Earthquake Insurance Programme for Greece," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(2), pages 377-400, April.

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