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.
All Science Journal Classification (ASJC) codes
- Statistics and Probability
- Economics and Econometrics
- Statistics, Probability and Uncertainty