Should the government provide insurance for catastrophes

By J. Cummins, William. R. Emmons, Scott E. Harrington, Dwight M. Jaffee, Howard Kunreuther, C. Lewis, E. Michel-Kerjan. 2006

133 citations recorded by the source corpus.

This paper evaluates the need for a government role in insuring natural and man-made catastrophes in the United States. Although insurance markets have been stressed by major natural catastrophes, such as Hurricane Katrina, government involvement in the market for natural catastrophe insurance should be minimized to avoid crowding-out more efficient private market solutions, such as catastrophe bonds. Instead, government should facilitate the development of the private market by reducing regulatory barriers. The National Flood Insurance Program has failed to cover most property owners exposed to floods and is facing severe financial difficulties. The program needs to be drastically revised or replaced by private market alternatives, such as federal "make available" requirements with a federal reinsurance backstop. A federal role may be appropriate to insure against mega-terrorist events. However, any program should be minimally intrusive and carry a positive premium to avoid crowding-out private market alternatives.

Subfields: Economics and Econometrics, Global and Planetary Change, Soil Science

View Paper: https://www.semanticscholar.org/paper/934dba6d26e1184719b428326e98b435a07e00d9

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In Economics and Econometrics

In Global and Planetary Change

Yoshito Takasaki

In Soil Science

Citations in the corpus

COVID-19 and finance: Agendas for future research (2020, unknown): “A strong role for the public sector is indicated in cases where the private sector is unwilling to insure (see how many pandemic exclusion clauses are in the fine print of insurance contracts), there would be less concern for the public sector crowding out private insurance (see Cummins, 2006) .”
Impact of the COVID-19 Pandemic on the Crude Oil and Stock Markets in the US: A Time-Varying Analysis (2020, background): “Numerous studies have attempted to explore and explain the interaction between pandemic and macro-economic variables, such as banking and insurance performance (Leoni, 2013), governments and public (Cummins, 2006), and financial markets (Chen et al.”
Natural Disaster, Poverty, and Development: An Introduction (2017, background): “For example, although Hurricane Katrina in the United States and the Great Hanshin Awaji Earthquake in Japan each generated economic damages of around $100 billion, the insured losses were $45 billion and $6 billion, respectively (Cummins, 2006; Sawada, 2007).”