Feasibility of Long-Term Interest Balance among Stakeholders in the Natural Catastrophe Insurance Market

Ning Zhang, Yang Che Wu, Wan Shiou Yang

Research output: Contribution to journalArticle

Abstract

This study establishes a stakeholder framework in the natural catastrophe insurance market: Insurers charge policyholders the full insurance premium and pay the public catastrophe insurance scheme (PCIS) contributions for the contingent bailout. The government subsidizes policyholders and taxes insurers. Then a series of accounting procedures is developed to illustrate how the stakeholders’ cash flows change. A numerical analysis reveals that both the PCIS and the subsidy policy can achieve long-term self-financing under special tax rates, contribution rates, and subsidy conditions. The results show that the short-term inequity of favoring insurers and policyholders can promote balanced long-term interests for all stakeholders.

Original languageEnglish
JournalNorth American Actuarial Journal
DOIs
Publication statusAccepted/In press - 2020 Jan 1

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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