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Catastrophic Responses to Catastrophic Risks

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  • Epstein, Richard A

Abstract

Socializing risks from catastrophic losses is difficult even in an ideal political environment, owing to different estimates of low probability risks, solvency constraints, dangers of moral hazard, and high loss correlation. However, these intrinsic contracting problems do not justify invalidating ordinary insurance contracts or forcing insurers to cover catastrophic losses. Yet, political pressures forcing insurance subsidies now induce inefficient decisions in siting and construction, with high expected social losses. Ordinary contract solutions are always imperfect, but superior to the regulatory maze. Unfortunately, patterns of legislation and court decisions are running in the wrong direction. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Epstein, Richard A, 1996. "Catastrophic Responses to Catastrophic Risks," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 287-308, May.
    • Handle: RePEc:kap:jrisku:v:12:y:1996:i:2-3:p:287-308
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    Cited by:

    1. Merrifield, John, 2002. "A general equilibrium analysis of the insurance bonding approach to pollution threats," Ecological Economics, Elsevier, vol. 40(1), pages 103-115, January.
    2. Nell, Martin & Richter, Andreas, 2004. "Catastrophic events as threats to society: Private and public risk management strategies," Working Papers on Risk and Insurance 12, University of Hamburg, Institute for Risk and Insurance.
    3. André SCHMITT & Sandrine SPAETER, 2005. "Hedging Strategies and the Financing of the 1992 International Oil Pollution Compensation Fund," Working Papers of BETA 2005-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Jerry R. Skees & Panos Varangis & Donald F. Larson & Paul Siegel, 2002. "Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks?," WIDER Working Paper Series DP2002-23, World Institute for Development Economic Research (UNU-WIDER).
    5. Jef Mot & Michael Faure, 2019. "Public authority liability and the cost of disasters," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 760-783, October.
    6. Kjell Hausken, 2002. "Probabilistic Risk Analysis and Game Theory," Risk Analysis, John Wiley & Sons, vol. 22(1), pages 17-27, February.
    7. Jason Scott Johnston, 2012. "Disasters and Decentralisation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(2), pages 228-256, April.
    8. Qihao He & Michael Faure & Chengwei Liu, 2023. "The possibilities and limits of insurance as governance in insuring pandemics," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(3), pages 641-668, July.
    9. Arnold N. Scott, 2000. "The Role of Government in Responding to Natural Catastrophes," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 10(4), pages 1-24, December.
    10. Véronique Bruggeman & Michael G. Faure & Miriam Haritz, 2008. "Schadensersatz für Opfer von Naturkatastrophen: ein Vergleich zwischen Belgien und den Niederlanden," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 77(4), pages 18-43.
    11. Yu Yan & Michael Faure, 2021. "Government interventions in microinsurance: evidence from China," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 440-467, July.
    12. Arnold N. Scott, 2000. "The Role Of Government In Responding To Natural Catastrophes," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 10(4), pages 505-526, December.
    13. Schwarze, Reimund & Wagner, Gert G., 2005. "Versicherungspflicht gegen Elementarschäden: Ein Lehrstück für Probleme der volkswirtschaftlichen Politikberatung," Discussion Papers 2005/4, Technische Universität Berlin, School of Economics and Management.
    14. Dannenberg, Astrid & Mennel, Tim & Osberghaus, Daniel & Sturm, Bodo, 2009. "The economics of adaptation to climate change: the case of Germany," ZEW Discussion Papers 09-057, ZEW - Leibniz Centre for European Economic Research.
    15. Christopher S. Martin & Nikolai G. Wenzel, 2018. "Misjudging the character of the welfare state: Hayek, generality, and the knowledge problem," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(3), pages 301-314, September.

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