The government as reinsurer of catastrophe risks

Compensation for victims of catastrophes is a hot topic in many countries today. Consequently, the legislator is increasingly intervening in the catastrophe insurance market in order to stimulate its functioning. Various forms of public-private partnerships have hence developed, although law and economics scholarship has differing views on this type of government intervention. The aim of this paper is to add to that debate by, on the one hand, discussing a few specific cases where the government acts as a reinsurer of last resort or as a primary insurer, and by, on the other hand, confronting these practical examples with five main conditions that would have to be fulfilled to make government intervention efficientor at least as little disruptive as possible: market failure, the charging of risk-based premiums, the stimulation of existing market solutions, the freedom to choose for State reinsurance and the temporary character.

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