MARKET AND CONTRACT DESIGN FOR CATASTROPHIC LOSSES巨灾损失地市场与合约设计.pdf

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1、DRAFTforColumbia-WhartonRoundtable,April12-13,2002MARKETANDCONTRACTDESIGNFORCATASTROPHICLOSSESNeilDohertyandPaulKleindorferClassicaltheoryofinsurancecontractingTheclassicaltheoryisdepictedinthefollowingboxes.Itstartswithapopulationwhoareriskaversebut

2、havingendowedrisk.Capitalisallocatedtoinsurerswhoareabletopool.Byunderwritingmanypoliciesandexploitingthelawoflargenumbers,insurerscanprovidealowriskreturnoncapital.Adeparturefromthesimpleclassicalmodelariseswithfrictionalcosts.Themostwidelyanalyzeda

3、reinformationasymmetryandmoralhazard(exanteandexpost).Secondbestcontractdesign(selfselectionmechanisms,expostsettling,etc)areselectedbycompetitiveinsurersandcontractsareclosed.TIME0PartiesexposedtoknownriskInvestorsprovideriskbearingcapitalRisktransf

4、ersimpededmoralhazardadverseselectionInsurersdesignsecondbestcontractwithincentivemechanismsrevelationmechanismsContractsclosed&premiumspaidInsurerwritespreadofriskTIME1RiskresolvedLossesobserved&paidorLossesnotobservedandsettledaccordingtoincentivec

5、ompatiblecontractfeatures-1-Theclassicaltheoryandcatastrophiclosses.Largelosses,suchasnaturaldisastersandterroristattacks,createanumberofproblemsforinsurancemarkets.Thefirstofthese,lackofindependence,iswellknownandintensivelyanalyzed.Whileperfectrisk

6、spreadingisnotpossible,asecondbestsolutioncanbeachievedthroughdecompositionofrisk.Diversifiableriskcanstillbedistributedwidelythroughtheinsurancepoolwithundiversifiableriskleftwiththepolicyholders.Thisprocess,mutualisation,wasfirstprescribedbyKarlBor

7、chin1962andformsthebasisfororganizingothermarketssuchasthecapitalmarket.THEMUTUALISATIONMODELAsecondandcloselyrelatedissueisambiguity.Theremaybemoreorlessstatisticalinformationfromwhichtoestimatethelossdistributionfortheeventitself,andtheprocessbywhi

8、chtheeconomiccostfromawelldefinedphysicaleventisdistributed,isnotwellunderstoodoreasytopredict.Wecanthinkofthesetwoproblemsasexanteandexpostambiguity.ExanteandexpostambiguityFormanynaturalhazards,theexanteambiguityproblemrecedesasmodelsoftheseeventse