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The Geneva Risk and Insurance Review

, Volume 44, Issue 1, pp 54–86 | Cite as

Natural disasters, land-use, and insurance

  • Céline Grislain-Letrémy
  • Bertrand VilleneuveEmail author
Original Article

Abstract

This paper addresses the urbanization of areas exposed to natural disasters and studies its dependency on land-use and insurance policies. In practice, we observe simple policies, consisting of a prohibited red zone and a zone without insurance tariff differentiation. Even if there are fixed damages per dwelling, the red-zone policy is relatively efficient; it implements the optimal land-use if the losses are proportional to the surface used. The main results are on the effects redefining the optimal red zone as the climate or the population changes. We expose plausible cases in which the red zone grows with a growing population.

Keywords

Natural disasters Insurance Land-use regulation Climate change 

JEL Classification

G22 R52 Q54 

Notes

Acknowledgements

The authors thank Nicolas Grislain, Frédéric Loss, Erwann Michel-Kerjan, and Marion Oury for their comments on the text. They also thank Stephen Coate for his help on public assistance, Valérie Sanseverino-Godfrin for explanations about law and legal precedents, and Cédric Peinturier and Clément Lenoble for explanations about risk engineering. This paper has benefited from comments by participants at the CREST internal seminars, the University Paris-Dauphine research day, the ETH Zurich and University of Nantes seminars, the Symposium on France-Taiwan Frontiers of Science, and the World Risk and Insurance Economics Congress. This study was supported by the FIME Research Initiative, the Chair Finance and Sustainable Development, and the Fondation du Risque.

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Copyright information

© International Association for the Study of Insurance Economics 2018

Authors and Affiliations

  • Céline Grislain-Letrémy
    • 1
  • Bertrand Villeneuve
    • 2
    Email author
  1. 1.CREST and Université Paris-DauphinePSL Research UniversityParisFrance
  2. 2.Université Paris-DauphinePSL Research UniversityParisFrance

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