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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 2006/10, Discussion Papers from Technische Universität Berlin, School of Economics and Management

Abstract: 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 (mis)perceived costs of a state guarantee, legal objections against a compulsory insurance, distributional conflicts between the federal government and the German 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.

Date: 2006
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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) Downloads
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