Disaster insurance or a disastrous insurance : natural disaster insurance in France

We model natural disaster insurance in France. We explicitly take into account the main institutional features of the system, such as the uniform premium rate in both high and low risk regions and the existence of a state reinsurance company. Our model indicates that the institutional set-up is fundamentally flawed. We find that the market is likely to lead to 'specialist? equilibria, where insurers specialize in serving either high or low risk regions. As a result the reinsurance company, which offers cover to all insurers at the same price, is likely to suffer from a portfolio with mainly ?bad? risks. We show that increasing the premium rate customers have to pay, a policy undertaken by the French authorities, will not necessarily solve these problems and comes at a high cost to the final consumer (and taxpayer).

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Year of publication:	2004
Authors:	Jametti, Mario ; von Ungern-Sternberg, Thomas
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	Elementarschadenversicherung \| Frankreich \| property insurance \| reinsurance \| risk selection

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Series:	CESifo Working Paper ; 1303
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	477260624 [GVK] hdl:10419/18668 [Handle]
Classification:	L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms ; G22 - Insurance; Insurance Companies ; D78 - Positive Analysis of Policy-Making and Implementation
Source:	EconStor

Persistent link: https://www.econbiz.de/10010261060