The benefits of introducing a mandatory state hurricane insurance scheme in Florida

As a result of its hurricane exposure, Florida is probably the part of the industrialised world most prone to natural catastrophes. Over the last 20 years the Florida legislator has tried to maintain a situation, where the private insurance sector plays a major role in providing hurricane-insurance. Its attempts to keep such insurance affordable have, however, led to a situation, where the public sector still ends up bearing a large part of the risk. Drawing on the experience of various European countries with mandatory state run catastrophe insurance schemes, we argue that the cost of hurricane insurance for the population could be substantially reduced, if Florida created a similar institution. The massive reduction in sales costs, loss adjustment costs and general administrative costs would allow such a system to work with premiums that are on average 25% lower. The problems of adverse selection which plague the current situation would of course (by definition) be eliminated.hurricane insurance; mandatory insurance; regulation; market failure; Florida

Hurricane Insurance in Florida

This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as "uninsurable" risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceeds their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small. The benefits for consumers as a group have thus been substantial. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the "bad risks" through the "good risks".hurricane; catastrophe insurance; regulation; market failure; Florida

Beyond Frozen Conflict Scenarios for the Separatist Disputes of Eastern Europe. CEPS Paperback

This book forms part of a wider project on the relations between the European Union and Georgia, Moldova and Ukraine, and in particular the Association Agreements and Deep and Comprehensive Free Trade Areas (DCFTAs) between these three states and the European Union. The wider project was begun in 2015 in the aftermath of the Maidan uprising at the beginning of 2014, which had been provoked when President Yanukovich reneged over the signing of Ukraine’s Association Agreement with the EU. Following Yanukovich’s flight to Russia, the Association Agreement was duly signed later in 2014. The agreements with Georgia, Moldova and Ukraine have a substantial common content, while differing in various details. Overall, they provide an association model of unprecedented extent and depth. Democratic political values are at the heart of the agreements, while the economic content goes far beyond classic free trade agreements to include a wholesale approximation of EU internal market regulatory law. The purpose of our wider project was first of all to explain the complex content of the Association Agreements and DCFTAs, which was achieved in a series of comprehensive handbooks published at www.3dcftas.eu. However, the agreements contain only short and simple articles on conflict prevention and management, without meaningful operational content. This was notwithstanding the fact that the EU considers itself, for its own historical reasons, to have a special vocation in conflict prevention and resolution. In addition, Georgia and Moldova were already the sites of unresolved separatist conflicts originating around the collapse of the Soviet Union three decades ago, namely Abkhazia and South Ossetia in Georgia, and Transdniestria in Moldova, to which we have added the case of the Nagorny Karabakh between Armenia and Azerbaijan. On top of this legacy, the Maidan uprising led to the Russian annexation of Crimea and its hybrid war in the Donetsk and Luhansk oblasts of the Donbas. The Donbas thus joined the old ‘frozen conflicts’. In the light of the above, CEPS took the initiative to examine all five unresolved conflicts, to assess where these disputes seem to be heading, and what different scenarios could be imagined for their future, including how the European Union might become more engaged. Indeed, while none of the conflicts are resolved, none are for that matter ‘frozen’. Our first practical priority was to find an author to undertake a comprehensive study of the Donbas, since conditions there make it practically impossible for any analysts from the government-controlled part of Ukraine or from Europe to safely enter these territories for research purposes. We were therefore very fortunate to find Nikolaus von Twickel who had recently been travelling in the Donbas as part of the OSCE Mission there, and is now an independent analyst. For the other four ‘old’ conflicts we were also most fortunate to bring in Thomas de Waal, who has been a leading scholar of the region for some decades, and was willing to bring the stories of these conflicts up to date. The two authors were able to address the complete set of conflicts with a consistent analytical approach, as will be evident from reading the sets of scenarios. We express our warm appreciation towards Sweden and the Swedish International Development Agency (Sida) for their support to the entire project. This volume looks at future prospects for the string of unresolved conflicts that continue to plague the post-Soviet world. Four of them date back to the period when the USSR began to break up in the late 1980s. A new conflict, with many different elements and some similarities, was added to the list in 2014: the Donbas in eastern Ukraine. The open confrontation between Russia and Ukraine over the Donbas and Crimea not only destroyed relations between Moscow and Kyiv but changed politics across the region, shaking up the dynamics of the four existing protracted territorial conflicts over Abkhazia, Nagorny Karabakh, South Ossetia and Transdniestria. The five post-Soviet conflicts are often called ‘frozen’, but this is a misnomer. Although the peace processes around them often look frozen, the situations themselves are anything but frozen and are constantly changing. Two of them, over the Donbas and Nagorny Karabakh, are either ongoing or close to violence. Each dispute has its own history, character and context, which has grown more distinctive over time and has been further shaped by the confrontation over Ukraine. Each continues to evolve. Here we chart scenarios for how these conflicts may develop further with the aim of focusing policymakers’ thinking on which tendencies are dangerous and which ones can be encouraged. There are many moving parts to these situations and complacency is not an option

State Intervention on the Market for Natural Damage Insurance in Europe

In this paper we briefly summarise the results of our studies of the property insurance market in 5 countries, Britain, Spain, France, Switzerland and Germany. We then draw conclusions, how the market for insurance against natural disasters (such as floods or subsidence) should be institutionally organised. Both for reasons of efficiency (lower administrative and sales costs) and to reduce the scope of risk selection, public monopolies should play an important role on this market. A further major advantage of the monopoly solution is the fact, that public insurers have a strong incentive to actively participate in prevention.