A Comparative Study of Public—Private Catastrophe Insurance Systems: Lessons from Current Practices

Youbaraj Paudel ()
Additional contact information
Youbaraj Paudel: Department of Environmental Economics, The Institute of Environmental Studies, VU University Amsterdam, Amerbos 409, Amsterdam, NH 1025Zh, The Netherlands.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2012, vol. 37, issue 2, 257-285

Abstract: Natural disasters risk is increasing in several regions around the world as a result of socio-economic development and climate change. This indicates the importance of establishing affordable and sustainable natural disaster risk management and compensation arrangements. Given the complexity of insuring extreme risks, insurers and governments often cooperate in catastrophe insurance systems. This paper presents a comparative study of the main components and a broad range of indicators of fully private and fully public, as well as public-private (PP) insurance systems, for extreme events, in ten countries. This analysis results in the following nine main recommendations for policymakers who aim to establish new, or improve existing, insurance arrangements for natural disasters: (1) mandatory participation requirements are advisable to achieve a high market penetration rate; (2) adequate monitoring and enforcement mechanisms need to be put in place to ensure compliance with these requirements; (3) the government needs to take responsibility for part of the (extreme) damage in order to keep an insurance system financially viable and affordable; (4) private insurance companies should participate in a PP insurance scheme by selling and administering policies and by covering medium-sized losses; (5) the integration in systems of risk transferring mechanisms is advisable; (6) it is advisable that governments stimulate the building-up of insurers’ reserves by providing tax exemptions; (7) risk mitigation policies should be carefully integrated in a natural disaster insurance system; (8) a detailed assessment and mapping of risk provides the basis for an effective mitigation policy; (9) insurance should provide financial incentives for policyholders to take risk mitigation measures.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.palgrave-journals.com/gpp/journal/v37/n2/pdf/gpp201216a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/gpp/journal/v37/n2/full/gpp201216a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:gpprii:v:37:y:2012:i:2:p:257-285

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().