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Optimal nuclear liability insurance

Alexis Louaas and Pierre Picard ()
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Alexis Louaas: X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique

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Abstract: We analyze the insurance of nuclear liability risk, from theoretical and applied standpoints. Firstly, we characterize the optimal insurance scheme for a low-probability industrial accident, such as a nuclear catastrophe, in a model of collective risk-sharing. Using catastrophe bond data, we then evaluate the cost of capital sustaining such an insurance mechanism. Finally, we characterize the individual lotteries associated with the risk of a nuclear accident in France, and we estimate the optimal coverage. We conclude that the corporate liability limit currently in force is likely to be inferior to the socially optimal level.

Date: 2019-01-28
New Economics Papers: this item is included in nep-ias and nep-rmg
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