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The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"""

Author

Listed:
  • Nathalie de Marcellis-Warin
  • Erwann Michel-Kerjan
Abstract
Twenty years ago, the French created a so far unique insurance scheme to cover damages due to natural catastrophes. This so-called ''Cat-Nat system'' combines private insurance industry, a state-guaranteed public reinsurance and the Treasury. We provide a simple game-theoretic model which seems to capture the situation of the concrete scheme. We find that, depending on its expectations, the government modulates its policy to induce private insurers adopting one of those two opposite strategies: (i) transfer all the covered risks to the public reinsurer and therefore simply behave as indemnification intermediaries; (ii) conserve the largest share of high risks. Il y a 20 ans, la France créait un système d assurance des sinistres dus aux catastrophes naturelles qui demeure unique au monde. Le système Cat.Nat est constitué d un partenariat entre l industrie privée de l assurance, un réassureur public et le Ministère des Finances. Nous proposons ici un modèle simple de ce système qui semble refléter concrètement son fonctionnement. Nous montrons que le gouvernement, suivant ses attentes, choisit de moduler sa politique de prise en charge de tels risques afin de conduire les assureurs privés à adopter l une des deux stratégies diamétralement opposées: (i) transférer tous les risques au réassureur public et ainsi se comporter comme de simples intermédiaires financiers; (ii) décider de conserver le plus possible de hauts risques.

Suggested Citation

  • Nathalie de Marcellis-Warin & Erwann Michel-Kerjan, 2001. "The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"""," CIRANO Working Papers 2001s-60, CIRANO.
    • Handle: RePEc:cir:cirwor:2001s-60
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    File URL: https://cirano.qc.ca/files/publications/2001s-60.pdf
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    References listed on IDEAS

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    1. Browne, Mark J & Hoyt, Robert E, 2000. "The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
    2. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    3. Cox, Samuel H. & Fairchild, Joseph R. & Pedersen, Hal W., 2000. "Economic Aspects of Securitization of Risk," ASTIN Bulletin, Cambridge University Press, vol. 30(1), pages 157-193, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Bernard Sinclair-Desgagné, 2001. "Incentives in Common Agency," Cahiers de recherche 01-08, HEC Montréal, Institut d'économie appliquée.
    2. Howard Kunreuther, 2002. "The Role of Insurance in Managing Extreme Events: Implications for Terrorism Coverage," Risk Analysis, John Wiley & Sons, vol. 22(3), pages 427-437, June.
    3. John W. Galbraith & Turgut Kisinbay, 2002. "Information Content of Volatility Forecasts at Medium-term Horizons," CIRANO Working Papers 2002s-21, CIRANO.
    4. Michael Faure & Donatella Porrini, 2017. "Göran Skogh on Risk Sharing and Environmental Policy," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 177-192, April.
    5. repec:tur:wpaper:3 is not listed on IDEAS
    6. Marcel Boyer & Donatella Porrini, 2002. "The Choice of Instruments for Environmental Policy: Liability or Regulation?," CIRANO Working Papers 2002s-17, CIRANO.
    7. Van Long, Ngo & Shimomura, Koji, 2004. "Relative wealth, status-seeking, and catching-up," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 529-542, April.
    8. Nathalie de Marcelis-Warin & Erwann Michel-Kerjan, 2003. "Catastrophe risk sharing and public-private partnerships : From natural disasters to terrorism," Working Papers hal-00242981, HAL.
    9. Serge Garcia & Alban Thomas, 2002. "An Empirical Analysis of Water Supply Contracts," CIRANO Working Papers 2002s-01, CIRANO.
    10. Ngo Long & Antoine Soubeyran, 2005. "Selective penalization of polluters: an inf-convolution approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(2), pages 421-454, February.
    11. Luigi Buzzacchi & Gilberto Turati, 2009. "Collective Risks in Local Administrations: Can a Private Insurer Be Better than a Public Mutual Fund?," Working papers 03, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    12. Michel Moreaux & Michel Truchon, 2002. "Maximal Decompositions of Cost Games into Specific and Joint Costs," CIRANO Working Papers 2002s-42, CIRANO.
    13. Julie Doonan & Paul Lanoie & Benoit Laplante, 2002. "Environmental Performance of Canadian Pulp and Paper Plants: Why Some Do Well and Others Do Not ?," CIRANO Working Papers 2002s-24, CIRANO.
    14. John W. Galbraith & Serguei Zernov & Victoria Zinde-Walsh, 2001. "Conditional Quantiles of Volatility in Equity Index and Foreign Exchange Data," CIRANO Working Papers 2001s-61, CIRANO.
    15. Yoshua Bengio & Charles Dugas, 2002. "Forecasting Non-Stationary Volatility with Hyper-Parameters," CIRANO Working Papers 2002s-50, CIRANO.
    16. Marcel Dagenais & Claude Montmarquette & Nathalie Viennot-Briot, 2001. "Dropout, School Performance and Working while in School : An Econometric Model with Heterogeneous Groups," CIRANO Working Papers 2001s-63, CIRANO.

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    More about this item

    Keywords

    catastrophe risk-sharing; French insurance system; public-private sector partnership; signaling equilibria; partage de risques catastrophiques; système français d'assurance; partenariat public/privé; équilibres de signal;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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