Risk Selection in Natural Disaster Insurance - the Case of France

Mario Jametti () and Thomas von Ungern-Sternberg

Working Papers from York University, Department of Economics

Abstract: It is widely recognized that “market failure” prevents e¢ cient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks involving public-private partnerships”. We de…ne risk selection as a situation where private companies pass insurance of high risk agents on to the public sector. We argue that this is a potentially important issue in such partnerships, illustrating our concerns with the case of France. We build a simple model that incorporates the main features of the system, such as the risk independent premium rate and the existence of a state reinsurer. We show that in our model, risk selection is likely to be present in equilibrium and discuss the policy options available. We …nd that the "stylized facts" of the French system correspond to our results. Additionally, the policies implemented by the gvernment correspond to policies characterized to reduce the potential of risk selection.

Keywords: Risk selection; property insurance; reinsurance; Franc (search for similar items in EconPapers)
JEL-codes: G22 L11 Q54 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-10
New Economics Papers: this item is included in nep-ias
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Working Paper: Risk Selection in Natural Disaster Insurance – the Case of France (2006)
Working Paper: Risk Selection in Natural Disaster Insurance -The Case of France (2006)
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