Risk Selection in Natural Disaster Insurance -The Case of France

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serval:BIB_38BDD8E40581
Type
Report: a report published by a school or other institution, usually numbered within a series.
Publication sub-type
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
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Publications
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Title
Risk Selection in Natural Disaster Insurance -The Case of France
Author(s)
Jametti M., von Ungern-Sternberg T.
Institution details
Université de Lausanne - HEC - DEEP
Issued date
02/2006
Number
06.02
Genre
Cahiers de recherches économiques
Language
english
Number of pages
21
Abstract
It is widely recognized that "market failure" prevents efficient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks presenting public sector participation, often praised as public-private partnerships. We define risk selection as a situation where private companies pass insurance of high risk agents on to the public "partner", arguing that this is a potentially important issue in such situations. In order to illustrate our concerns we look at the case of France. We build a simple model that incorporates the main features of the system, such as the uniform premium rate in both high and low risk regions and the existence of a state reinsurer. We show that in our model, risk selection is likely to be present at equilibrium and discuss the policy options available. When comparing with the actual situation in France we find that the "stylized facts" of the system correspond to our results. Additionally, the policies implemented by the government correspond to policies characterized to reduce the potential of risk selection.
Keywords
risk selection, property insurance, reinsurance, France
Create date
13/08/2013 15:31
Last modification date
21/08/2019 6:08
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