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Risk Attitudes to Catastrophic Events: VSL and WTP for Insurance Against Earthquakes

Author

Listed:
  • Nicolò Barbieri

    (Università degli Studi di Ferrara
    SEEDS (Sustainability, Environmental Economics and Dynamics Studies))

  • Massimiliano Mazzanti

    (Università degli Studi di Ferrara
    SEEDS (Sustainability, Environmental Economics and Dynamics Studies))

  • Anna Montini

    (SEEDS (Sustainability, Environmental Economics and Dynamics Studies)
    Università di Bologna – Alma Mater Studiorum)

  • Andrea Rampa

    (SEEDS (Sustainability, Environmental Economics and Dynamics Studies)
    Italian Ministry of Economy and Finance)

Abstract

The purpose of the paper is to investigate the attitude to risk related to low-probability, high-impact events. To do this, we compare the willingness to pay (WTP) to reduce mortality risks and the WTP for life insurance against earthquakes. We explore whether risk perception affects these measures, and exploit WTP to reduce risk of fatality to calculate the Value of a Statistical Life (VSL) related to seismic events. We rely on data from a survey administered to a representative sample of the Italian population. Our results highlight that the WTP to reduce mortality risk is lower than the WTP for life insurance, and that the correlations between risk perception and these two measures differ. The findings suggest that individuals’ preferences are directed toward risk management strategies in which the mortality risk is transferred to the capital market, rather than risk mitigation strategies involving the individual in sharing the costs and benefits with all of society.

Suggested Citation

  • Nicolò Barbieri & Massimiliano Mazzanti & Anna Montini & Andrea Rampa, 2022. "Risk Attitudes to Catastrophic Events: VSL and WTP for Insurance Against Earthquakes," Economics of Disasters and Climate Change, Springer, vol. 6(2), pages 317-337, July.
    • Handle: RePEc:spr:ediscc:v:6:y:2022:i:2:d:10.1007_s41885-022-00109-7
    DOI: 10.1007/s41885-022-00109-7
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    More about this item

    Keywords

    Value of a statistical life; Natural disaster; Risk-analysis; Life insurance;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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