 | I am a PhD candidate at CREST, Ecole Polytechnique. My main fields of interests are risk and insurance economics. I currently work on the insurance of nuclear catastrophes and natural disasters. You can contact me at: alexis (dot) louaas (at) polytechnique (dot) edu. I have visited the Risk Management and Insurance department at Georgia State University during three months in Spring 2016 and I am currently working for the Winners project. For more details about my curriculum, please see my resume. |
Working papers
This paper analyzes the optimal insurance for low-probability high-severity accidents, such as nuclear catastrophes, both from theoretical and applied standpoints. The risk premium of such catastrophic events may be a non-negligible proportion of individuals’ wealth when the absolute risk aversion is very large in the accident state. The optimal indemnity schedule converges to a limit when the probability of the accident tends to zero. In the case of the limited liability of an industrial firm that may cause large scale damages, this limit schedule, and the associated corporate insurance contract, correspond to a straight deductible indemnification rule, in which victims are ranked according to the severity of their losses. The empirical part of the paper is an application of these general principles to the case of nuclear corporate liability. We calibrate a model using French data in order to estimate the optimal liability upper limit of a nuclear energy producer. We show that the upper limit adopted in 2004 through the revision of the Paris Convention is probably lower than the socially optimal level.
Failing to insure disaster risks : the role of capital requirements, with Arnaud Goussebaile
Why are catastrophic events so difficult to insure? Their extreme severity advocates for a wide-spread use of insurance, yet they are typically excluded from US homeowner policies. It is also puzzling to notice that some low-probability risks such as damages from lightnings are covered under all US homeowner policies whereas others, such as earthquakes and floods are not. Our model explains this puzzle by showing that the effect of aggregate uncertainty, a well-known threat to insurability, is amplified when the individual loss probability is small. Low-probability risks with aggregate uncertainty, such as earthquakes and floods, therefore display lower insurance take-up rates than low-probability risks without aggregate uncertainty such as lightning strikes.
Pooling correlated risks in a community, with Arnaud Goussebaile
We analyze the design of contracts when individual risks are correlated between risk-averse agents in a community. If the community has access to fair reinsurance, the insurance facility of the community supplies standard contracts to its members. If reinsurance is above fair prices, it supplies mutual contracts which are contingent on the collective state. Without transaction costs inside the community, risk-averse agents fully insure against their individual risk and share collective risk by getting some dividend in normal states. With transaction costs, they only partially insure against their individual risk, getting a lower indemnity in catastrophic states than in normal states, and get some dividend in normal states. We illustrate the emergence of the latter contracts for the community of the Caribbean countries exposed to natural disaster risks.