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- W3023644449 abstract "Little is known about how an ex-ante public-private risk-sharing program affects the efficiencyof a catastrophe risk market and the behavior of market players. We develop a dynamic gamemodel that analyzes three decision makers—individuals, a private insurer, and a governmentacting as reinsurer—to derive their optimal pricing, capital, and purchasing decisions for efficientcatastrophe risk-sharing. In the equilibrium, government reinsurance addresses catastropheinsurance market failure and improves social welfare through the product quality and capitalcost channels: (i) the insurer holds more capital to improve the product quality of catastropheinsurance; (ii) individuals increase their maximum willingness to pay for catastrophe risk transfer,saving the capital cost of catastrophe insurance. The effects of these two channels wax andwane depending on the market structure. As a tradeoff, government reinsurance may decreaseindividuals’ expected utilities and increase the insurer’s default probability when competition isinsufficient in catastrophe insurance markets." @default.
- W3023644449 created "2020-05-13" @default.
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- W3023644449 date "2018-01-01" @default.
- W3023644449 modified "2023-09-23" @default.
- W3023644449 title "Pricing the Catastrophic Reinsurance by Government" @default.
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- W3023644449 doi "https://doi.org/10.2139/ssrn.3270669" @default.
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