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Optimal Catastrophe Insurance with Multiple Catastrophes

Author

Listed:
  • Henri LOUBERGE

    (University of Geneva)

  • Harris SCHLESINGER

    (University of Alabama)

Abstract

This paper adopts a normative approach to catastrophe insurance. It addresses the question of how innovations in the design of insurance contracts could help resolve the capacity gap in the provision of insurance against natural catastrophes. It extends previous research with the same approach first by considering the case of "uncorrelated catastrophes", and second by combining the influence of catastrophes on claims amounts (severity risk) and on the probability of loss (frequency risk). We show that the menu of contracts proposed in previous research, where only one type of catastrophe is considered, is dominated by the menu of contracts proposed in this paper, taking into account the absence of correlation between catastrophes of different kinds.

Suggested Citation

  • Henri LOUBERGE & Harris SCHLESINGER, 1999. "Optimal Catastrophe Insurance with Multiple Catastrophes," FAME Research Paper Series rp7, International Center for Financial Asset Management and Engineering.
    • Handle: RePEc:fam:rpseri:rp7
    as

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    File URL: http://www.swissfinanceinstitute.ch/rp7.pdf
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    References listed on IDEAS

    as
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    5. repec:fth:geneec:99.01 is not listed on IDEAS
    6. Eeckhoudt, Louis & Gollier, Christian & Schlesinger, Harris, 1997. "The no-loss offset provision and the attitude towards risk of a risk-neutral firm," Journal of Public Economics, Elsevier, vol. 65(2), pages 207-217, August.
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    Cited by:

    1. Sam Cole, 2010. "The regional portfolio of disruptions, protection, and disasters," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 251-272, April.

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