Abstract
A recent surge in natural disaster losses in the United States has created widespread disruptions in the property insurance market and generated calls for federal protection against natural disaster risk. This article examines the market for disaster insurance in the United States and finds that insurance markets are limited in their ability to intertemporally diversify catastrophic risk. In a targeted response, this article proposes a new form of federal reinsurance based on the auctioning of multiple peril catastrophe call spread options that cover industry losses in the range of $25-$50 billion. This article argues that the sale of these catastrophe excess-of-loss contracts utilizes the unique intertemporal diversification capabilities of the federal government to expand the market for natural disaster risk while enhancing the private market equilibrium for insurance.
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.
