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Coping with catastrophic risk : the role of (non)-participating contracts

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  • Olivier Mahul
  • . European Group of Risk And Insurance Economists

    (EGRIE - European Group of Risk and Insurance Economists)

Abstract

This paper examines how the two fundamentals principles in risk allocation, i.e., the mutuality principle and the transfer principle, can be implemented in order to manage efficiently catastrophic risk. From a decomposition of the insurable loss into idiosyncratic and systemic components, we show that the systemic risk is first filtered through a participating policy with a variable premium based on the realized systemic loss, and then it is transferred through an insurance contract providing a coverage on the variable premium. This model is reconsidered to examine the financing of catastrophe risk with alternative risk tranfer solutions. Group captives, offering participating policies, are shown to be market enhancing.

Suggested Citation

  • Olivier Mahul & . European Group of Risk And Insurance Economists, 2002. "Coping with catastrophic risk : the role of (non)-participating contracts," Post-Print hal-01952130, HAL.
    • Handle: RePEc:hal:journl:hal-01952130
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    Cited by:

    1. Enjolras, Geoffroy & Kast, Robert, 2007. "Using participating and financial contracts to insure catastrophe risk: Implications for crop risk management," 101st Seminar, July 5-6, 2007, Berlin Germany 9268, European Association of Agricultural Economists.
    2. Kalavakonda, Vijay & Mahul, Olivier, 2005. "Crop insurance in Karnataka," Policy Research Working Paper Series 3654, The World Bank.

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    Keywords

    RISQUE SYSTEMIQUE;

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