Hurricane Insurance in Florida

Mario Jametti () and Thomas von Ungern-Sternberg

Quaderni della facoltà di Scienze economiche dell'Università di Lugano from USI Università della Svizzera italiana

Abstract: This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as “uninsurable” risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceed their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens Property Insurance Corporation (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small, with substantial benefits for consumers as a group. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the “bad risks” through the “good risks”.

Keywords: Hurricane; Catastrophe Insurance; Regulation; Market Failure; Florida (search for similar items in EconPapers)
JEL-codes: G22 L33 L51 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2009
New Economics Papers: this item is included in nep-ias and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://doc.rero.ch/lm.php?url=1000,42,6,20090817140229-WG/wp0905.pdf (application/pdf)

Related works:
Working Paper: Hurricane Insurance in Florida (2009)
Working Paper: Hurricane Insurance in Florida (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lug:wpaper:0905

Access Statistics for this paper

More papers in Quaderni della facoltà di Scienze economiche dell'Università di Lugano from USI Università della Svizzera italiana
Bibliographic data for series maintained by Alessio Tutino ().