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Optimal nuclear liability insurance

Author

Listed:
  • Alexis Louaas

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Pierre Picard

    (X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

Abstract

We analyze the insurance of nuclear liability risk, from theoretical and applied standpoints. Firstly, we characterize the optimal insurance scheme for a low-probability industrial accident, such as a nuclear catastrophe, in a model of collective risk-sharing. Using catastrophe bond data, we then evaluate the cost of capital sustaining such an insurance mechanism. Finally, we characterize the individual lotteries associated with the risk of a nuclear accident in France, and we estimate the optimal coverage. We conclude that the corporate liability limit currently in force is likely to be inferior to the socially optimal level.

Suggested Citation

  • Alexis Louaas & Pierre Picard, 2019. "Optimal nuclear liability insurance," Working Papers hal-01996648, HAL.
    • Handle: RePEc:hal:wpaper:hal-01996648
    Note: View the original document on HAL open archive server: https://hal.science/hal-01996648
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    References listed on IDEAS

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