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Feasibility of Long-Term Interest Balance among Stakeholders in the Natural Catastrophe Insurance Market

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  • Ning Zhang
  • Yang-Che Wu
  • Wan-Shiou Yang

Abstract

This study establishes a stakeholder framework in the natural catastrophe insurance market: Insurers charge policyholders the full insurance premium and pay the public catastrophe insurance scheme (PCIS) contributions for the contingent bailout. The government subsidizes policyholders and taxes insurers. Then a series of accounting procedures is developed to illustrate how the stakeholders’ cash flows change. A numerical analysis reveals that both the PCIS and the subsidy policy can achieve long-term self-financing under special tax rates, contribution rates, and subsidy conditions. The results show that the short-term inequity of favoring insurers and policyholders can promote balanced long-term interests for all stakeholders.

Suggested Citation

  • Ning Zhang & Yang-Che Wu & Wan-Shiou Yang, 2021. "Feasibility of Long-Term Interest Balance among Stakeholders in the Natural Catastrophe Insurance Market," North American Actuarial Journal, Taylor & Francis Journals, vol. 25(2), pages 163-185, April.
    • Handle: RePEc:taf:uaajxx:v:25:y:2021:i:2:p:163-185
    DOI: 10.1080/10920277.2019.1705169
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