IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Reflections on U.S. Disaster Insurance Policy for the 21st Century

  • Howard Kunreuther
Registered author(s):

    The devastation caused by hurricanes during the 2004 and 2005 seasons has been unprecedented and is forcing the insurance industry to reevaluate the role that it can play in dealing with future natural disasters in the United States. As shown in Table 1 the four hurricanes that hit Florida in the fall of 2004 -- Charley, Frances, Ivan and Jeanne---and Hurricanes Katrina and Rita in 2005 comprised half of the top 12 disasters with respect to insured losses between 1970 and 2005. On a related note, 18 of the 20 most costly disasters occurred between 1990 and 2005 and 10 occurred in the 21st Century. This context is totally different than the scale of economic loss the country has suffered from natural disasters and other extreme events in the 20th century. The first section of the paper addresses the first question by outlining two principles on which a disaster insurance program should be based. Section 3 then focuses on the second question by analyzing the insurability of a risk and examining the challenges facing the private sector in providing coverage against natural disasters. Section 4 turns to the third question and delineates the opportunities and challenges of a comprehensive disaster insurance program. Section 5 poses a set of open issues that are currently being addressed by a research project on disaster insurance undertaken by the Wharton Risk Center in conjunction with the Insurance Information Institute and Georgia State University. The concluding section summarizes the key issues associated with providing disaster insurance in the 21st century.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.nber.org/papers/w12449.pdf
    Download Restriction: no

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12449.

    as
    in new window

    Length:
    Date of creation: Aug 2006
    Date of revision:
    Handle: RePEc:nbr:nberwo:12449
    Note: PE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Hogarth, Robin M & Kunreuther, Howard, 1989. " Risk, Ambiguity, and Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 5-35, April.
    2. Martin F. Grace & Robert W. Klein & Paul R. Kleindorfer, 2004. "Homeowners Insurance With Bundled Catastrophe Coverage," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 351-379.
    3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    4. Kunreuther, Howard & Novemsky, Nathan & Kahneman, Daniel, 2001. " Making Low Probabilities Useful," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 103-20, September.
    5. J. David Cummins, 2006. "Should the government provide insurance for catastrophes?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 337-380.
    6. Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
    7. Greenwald, Bruce C & Stiglitz, Joseph E, 1990. "Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior," American Economic Review, American Economic Association, vol. 80(2), pages 160-65, May.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12449. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.