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Natural disaster insurance and the equity-efficiency trade-off

Pierre Picard

Working Papers from HAL

Abstract: This paper investigates the role of private insurance in the prevention and mitigation of natural disasters. We characterize the equity-efficiency trade-off faced by the policymakers under imperfect information about individual prevention costs. It is shown that a competitive insurance market with actuarial ratemaking and compensatory tax-subsidy transfers is likely to dominate regulated uniform insurance pricing rules or state-funded assistance schemes. The model illustrates how targeted tax cuts on insurance contracts can improve the incentives to prevention, while compensating the individuales with high prevention costs. The paper also highlights the complementarity between individual incentives through tax cuts and collective incentives through grants to the local jurisdictions where risk management plans are enforced

Date: 2005
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00243028
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Related works:
Journal Article: Natural Disaster Insurance and the Equity-Efficiency Trade-Off (2008) Downloads
Working Paper: Natural Disaster Insurance and the Equity-Efficiency Trade-Off (2008)
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