Insurability of catastrophic risks

Abstract : This thesis addresses several aspects of the insurability of catastrophic risks. In a first chapter, we focus on very low probability events and we show how hybrid financial instruments can be used to extend the domain of insurablerisks. Our application to the case of nuclear accidents using cat-bonds data in France shows that despite the higherprice of reinsurance for low probability events, it is advisable to insure more than is currently provided for by the Frenchlaw. The second chapter takes on the issue of why reinsurance is more costly for low probability events. We show thatbecause catastrophic risks have a systemic component, they give rise to a risk premium in equilibrium which decreasesat a lower pace than the willingness to pay for insurance. We use this finding to explain why systemic low probability catastrophes are hard to insure. The third chapter investigates the role of mutual and participating contracts to improveinsurability. Such contracts are necessary for people to adjust their demand for insurance when individual losses are correlated. Finally, the fourth chapter investigates the use of cat-bonds to hedge the risk of extreme agricultural suppliesprice variations. By issuing a cat-bond, the firm that purchases supplies borrows a capital that can be retained in caseof catastrophe. Such a solution would combine the advantage of risk-pooling, to lower the price of insurance, with lowerbasis risk compared to more traditional hedging strategies such as future purchases.
Document type :
Theses
Complete list of metadatas

Cited literature [111 references]  Display  Hide  Download

https://pastel.archives-ouvertes.fr/tel-01958590
Contributor : Abes Star <>
Submitted on : Tuesday, December 18, 2018 - 10:16:30 AM
Last modification on : Thursday, April 11, 2019 - 5:28:54 AM
Long-term archiving on : Wednesday, March 20, 2019 - 10:45:33 AM

File

58210_LOUAAS_2018_archivage.pd...
Version validated by the jury (STAR)

Identifiers

  • HAL Id : tel-01958590, version 1

Citation

Alexis Louaas. Insurability of catastrophic risks. Economics and Finance. Université Paris-Saclay, 2018. English. ⟨NNT : 2018SACLX038⟩. ⟨tel-01958590⟩

Share

Metrics

Record views

145

Files downloads

98