Natural Disasters and the Financing of Fat Tails: Lessons from the Economics and Political Economy of Weather-Related Insurance

16 Pages Posted: 14 Apr 2013

See all articles by Donald T. Hornstein

Donald T. Hornstein

University of North Carolina School of Law

Date Written: April 12, 2013

Abstract

Three hypotheses are explored related to state-run residual insurance markets in weather-related insurance. First, that private insurers, having already exited flood insurance markets in 1968, are currently well into the process of leaving private wind related coverage because of storm-related losses viewed as unprofitable at currently allowed rates and/or as uninsurable. Second, that as state-centered residual risk entities have replaced private insurers, there is no unified strategy among these entities as to the financial sustainability of the residual risk pools. Third, that although both private insurers and residual risk pools could improve the risk landscape by actively championing measures to retrofit existing homes, they are not doing so.

Suggested Citation

Hornstein, Donald T., Natural Disasters and the Financing of Fat Tails: Lessons from the Economics and Political Economy of Weather-Related Insurance (April 12, 2013). UNC Legal Studies Research Paper No. 2249904, Available at SSRN: https://ssrn.com/abstract=2249904 or http://dx.doi.org/10.2139/ssrn.2249904

Donald T. Hornstein (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-962-4133 (Phone)

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