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Mitigating Catastrophe Risk For Landowners, Stewart E. Sterk

Articles

Local, national, and global catastrophes entail significant risk for landowners. The government-sponsored National Flood Insurance Program illustrates how subsidizing insurance against catastrophe risk can result in overinvestment in risk-prone properties. Government intervention, however, has largely been a response to the historical failure of the private insurance industry to provide adequate protection against correlated risks, a failure with the potential to generate underinvestment in land and devastate existing owners.

When data is available about the incidence and severity of potential disasters, improvements in technology have made it more feasible for insurers to calibrate premiums and discounts with greater accuracy, and sophisticated …