An Examination of the Geographic Aggregation of Catastrophic Risk

Autor:	Randy E. Dumm, Charles C. Watson, Mark E. Johnson
Rok vydání:	2014
Předmět:	Catastrophic risk Economics and Econometrics Actuarial science Reserve requirement business.industry Pooling Residential property Financial risk management Subsidy General Business Management and Accounting Accounting Economics Risk pool business Finance Risk management
Zdroj:	The Geneva Papers on Risk and Insurance - Issues and Practice. 40:159-177
ISSN:	1468-0440 1018-5895
DOI:	10.1057/gpp.2014.20
Popis:	The debate in the United States about establishing a mechanism for insuring catastrophic wind risk at the national level pre-dates the intense 2004–2005 hurricane seasons. The prevailing argument against establishing any larger risk pool is that it would create a subsidy for the higher risk exposures. To determine whether benefits do accrue by aggregating catastrophic risk across increasingly wide geographic areas, the paper uses catastrophe models to evaluate the behavior of residential property portfolios within the state of Florida and for a larger risk pool that includes multiple combinations of coastal states in the southeastern United States. We find that geographic aggregation does not inherently subsidise high-risk exposures, reduces uncertainty, and reduces required reserves relative to total exposure for the least frequent and more severe events. This finding holds true for all state combinations evaluated in this study.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::03433330f909d2601b3c22485a3c3f83 https://doi.org/10.1057/gpp.2014.20 Zobrazit plný text záznamu Full text from SpringerLink