The Political Economy of Natural Disaster Insurance: Lessons from the Failure of a Proposed Compulsory Insurance Scheme in Germany
Reimund Schwarze and
Gert Wagner ()
No 620, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
This paper studies the politico-economic reasons for the refusal of a proposed compulsory flood insurance scheme in Germany. It provides the rationale for such scheme and outlines the basic features of a market-orientated design. The main reasons for the political down-turn of this proposal were the misperceived costs of a state guarantee, legal objections against a compulsory insurance, distributional conflicts between the federal government and the Ger-man states (Länder) on the implied administrative costs, and the well-known charity hazard of ad-hoc disaster relief. The focus on pure market solutions proved to be an ineffective strategy for policy advice in this field.
Pages: 19 p.
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Working Paper: The political economy of natural disaster insurance: Lessons from the failure of a proposed compulsory insurance scheme in Germany (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp620
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