Risk Selection in Natural-Disaster Insurance

Mario Jametti () and Thomas von Ungern-Sternberg

Journal of Institutional and Theoretical Economics (JITE), 2010, vol. 166, issue 2, 344-364

Abstract: It is widely recognized that market failure prevents efficient risk sharing in natural-disaster insurance, leading to several public-private partnership arrangements across the globe. We argue that risk selection by the private partner is potentially an important issue. We illustrate our concerns with a simple model of reinsurance in a natural-disaster insurance market, based on the French system. Risk selection is a likely equilibrium outcome. Notably, the policies implemented by the French government correspond to the ones we identify to alleviate risk selection. Next, we discuss two public-private partnership settings that deal effectively with risk selection: Florida and Spain.

JEL-codes: G22 L11 Q54 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Working Paper: Risk selection in natural disaster insurance (2009)
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