Risk Selection in Natural Disaster Insurance the Case of France

It is widely recognized that "market failure" prevents efficient risksharing in natural disaster insurance. As a consequence, many countriesadopted institutional frameworks presenting public sector participation,often praised as public-private partnerships. We define risk selection asa situation where private companies pass insurance of high risk agentson to the public "partner", arguing that this is a potentially importantissue in such situations. In order to illustrate our concerns we look atthe case of France. We build a simple model that incorporates the mainfeatures of the system, such as the uniform premium rate in both highand low risk regions and the existence of a state reinsurer...