Report
What does it take for a risk to be insurable?
For a risk to be insurable, three conditions must be met: The risk must be diversifiable (over time, between people, between regions); It must be possible to model the risk, so that the insurance can be priced; It must be possible to model the moral hazard that arises from insuring the risk. There are risks today that are difficult to insure: Non-diversifiable (climate risks, pandemics); Difficult to model (pandemics, cyber risk); Insuring them leads to significant moral hazard (building in flood-prone areas, cybersecurity, etc.). So what should be done? Have the government provide insurance? Regulate or prevent rather than insure?
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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