Abstract
Insurance coverage for natural disasters remains low in many exposed areas. A limited supply of insurance is commonly identified as a primary causal factor in this low insurance coverage. The French overseas departments provide a rare natural experiment of a well-developed supply of natural disasters insurance in highly exposed regions. The French system of natural disasters insurance is underwritten and regulated by the French government; instituted initially for metropolitan France only, it was extended to overseas departments in the state of emergency following Hurricane Hugo in 1989. This natural experiment makes it possible to analyze the determinants of insurance coverage on the demand side. Based on unique household-level microdata, I estimate an insurance market model which had not yet been empirically tested. Using this structural approach, I show that underinsurance in the French overseas departments is neither due to perception biases nor to unaordable insurance, but mainly to uninsurable housing and to the anticipation of assistance, which crowds out insurance. Individual insurance decisions are influenced by neighbors’ insurance choices through peer eects and neighborhood eligibility for assistance.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
