Model assessment of public–private partnership flood insurance systems: an empirical study of Japan

Jie Shao ()
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Jie Shao: Waseda University

The Geneva Papers on Risk and Insurance - Issues and Practice, 2022, vol. 47, issue 1, No 5, 79-102

Abstract: Abstract The public–private partnership (or PPP) system is widely hailed as an effective approach to flood insurance. PPP effectiveness can be empirically demonstrated through an analytic framework based on model assessment, which we apply to Japan as an illustrative case study. We first introduce the widely-observed market failure phenomenon in the catastrophe insurance sector and how PPP systems may serve to avert this failure. We then proceed to select three candidate systems and model them respectively. Subsequently, we employ empirical data and Monte Carlo simulations to evaluate suitability for Japan’s case via three perspectives. The results identified the market-oriented system as the economically-optimal choice. It should be noted, however, that the assessment is dependent on the priorities of each party and market-negotiated results. We find this methodology to be suitable for identifying the most adequate PPP system and invite policymakers to consider its use when implementing their own systems.

Keywords: PPP flood insurance; Case study; Comparative analysis; Empirical analysis; Ruin theory; Monte Carlo (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41288-021-00213-x

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