Epidemic and Pandemic Risk Transfer Solutions and Options for Public Sector Support

Kraut, Gunther; Kuiper, Raymond de

doi:10.2139/ssrn.3888337

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Intertemporal Risk-sharing and The Design Of The Pandemic In...1

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2021

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“…This brings the question about the design of a risk-sharing mechanism that combines the expertise and the capacity of the insurance industry with those of the financial market and the public sector. Several such proposals are being discussed between the regulators and the insurance industry, for example, EIOPA (2020), The Geneva Association (2021), Klein and Weston (2020), and Kraut and de Kuiper (2021). Ultimately, many proposals involve enhancing the cross-sectional risk-sharing by insurers with an intertemporal risk-sharing mechanism either financed or guaranteed by the government.…”

Section: Intertemporal Risk-sharing and The Design Of The Pandemic In...mentioning

confidence: 99%

Insurability of Pandemic Risks

et al. 2020

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Section: Intertemporal Risk-sharing and The Design Of The Pandemic In...mentioning

confidence: 99%

Insurability of Pandemic Risks

et al. 2020

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Insurability of pandemic risks

Gründl

Guxha

Kartasheva

et al. 2021

J of Risk & Insurance

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This paper analyzes the scope of the private market for pandemic insurance. We develop a framework that explains theoretically how the equilibrium price of pandemic insurance depends on accumulation risk, covariance between pandemic claims and other claims, and covariance between pandemic claims and the stock market performance. Using the natural catastrophe (NatCat) insurance market as a laboratory, we estimate the relationship between the insurance price markup and the tail characteristics of the loss distribution. Then, by using the high‐frequency data tracking the economic impact of the COVID‐19 pandemic in the United States, we calibrate the loss distribution of a hypothetical insurance contract designed to alleviate the impact of the pandemic on small businesses. The pandemic insurance contract price markup corresponds to the top 20% markup observed in the NatCat insurance market. Then we analyze an intertemporal risk‐sharing scheme that can reduce the expected shortfall of the loss distribution by 50%.

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Epidemic and Pandemic Risk Transfer Solutions and Options for Public Sector Support

Cited by 2 publications

References 0 publications

Insurability of Pandemic Risks

Insurability of Pandemic Risks

Insurability of pandemic risks

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