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Insuring California earthquakes and the role for catastrophe bonds

Author

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  • José Penalva

Abstract

The 1994 Northridge earthquake sent ripples to insurance conpanies everywhere. This was one in a series of natural disasters such as Hurricane Andrew which together with the problems in Lloyd's of London have insurance companies running for cover. This paper presents a calibration of the U.S. economy in a model with financial markets for insurance derivatives that suggests the U.S. economy can deal with the damage of natural catastrophe far better than one might think.

Suggested Citation

  • José Penalva, 2001. "Insuring California earthquakes and the role for catastrophe bonds," Economics Working Papers 527, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:527
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    File URL: https://econ-papers.upf.edu/papers/527.pdf
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    More about this item

    Keywords

    Catastrophe bonds; eartquake insurance; calibration; survival analysis;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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