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Some Aspects of the Economics of Catastrophe Risk Insurance

  • Christian Gollier

The ability to share risk efficiently in the economy is essential to welfare and growth. However, the increased frequency of natural catastrophes over the last decade has raised once again questions associated to the limits of insurability in a free-market economy, and to the relevance of public interventions on risk-sharing markets. In this paper, we explore the potential reasons for the lack of insurance specifically associated to catastrophe environmental risks. Our final aim is to link each source of possible market inefficiency to its possible remedies.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1409.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1409
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  1. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-80, March.
  2. GOLLIER, Christian, . "Pareto-optimal risk sharing with fixed costs per claim," CORE Discussion Papers RP -774, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Christian Gollier, 2003. "To Insure or Not to Insure?: An Insurance Puzzle," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 28(1), pages 5-24, June.
  4. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  5. Boyer, Marcel & Laffont, Jean-Jacques, 1997. "Environmental risks and bank liability," European Economic Review, Elsevier, vol. 41(8), pages 1427-1459, August.
  6. Geoffrey Heal & Howard Kunreuther, 2003. "You Only Die Once: Managing Discrete Interdependent Risks," NBER Working Papers 9885, National Bureau of Economic Research, Inc.
  7. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  8. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
  9. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  10. Kunreuther, Howard & Hogarth, Robin & Meszaros, Jacqueline, 1993. " Insurer Ambiguity and Maarket Failure," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 71-87, August.
  11. Eeckhoudt, L. & Gollier, C., 1996. "The Insurance of Low Probability Events," Papers 976.423, Toulouse - GREMAQ.
  12. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, June.
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