Céline Grislain-Letrémy

Natural Disasters: Exposure and Underinsurance

Insurance coverage for natural disasters remains low in many exposed areas. A limited supply of insurance is commonly identified as a primary causal factor in this low insurance coverage. The French overseas departments provide a rare natural experiment of a well-developed supply of natural disasters insurance in highly exposed regions. The French system of natural disasters insurance is underwritten and regulated by the French government; instituted initially for metropolitan France only, it was extended to overseas departments in the state of emergency following Hurricane Hugo in 1989. This natural experiment makes it possible to analyze the determinants of insurance coverage on the demand side. Based on unique household-level microdata, I estimate an insurance market model which had not yet been empirically tested. Using this structural approach, I show that underinsurance in the French overseas departments is neither due to perception biases nor to unaffordable insurance, but mainly to uninsurable housing and to the anticipation of assistance, which crowds out insurance. Individual insurance decisions are influenced by neighbors’ insurance choices through peer effects and neighborhood eligibility for assistance

How Does Fuel Taxation Impact New Car Purchases? An Evaluation Using French Consumer-Level Data

This paper sets out to identify the impact of fuel prices on new car purchases, using exhaustive individual-level data of monthly registration of new private cars in France from 2003 to 2007. Detailed information on the car holder enables us to account for heterogeneous preferences across purchasers. We identify demand parameters through the large oil price fluctuations of this period. We find that the sensitivity of short-term demand with respect to fuel prices is generally low. Using these estimates, we assess the impact of a policy equalizing diesel and gasoline taxes, assuming that consumers react similarly to fuel price changes from tax and from oil price variations. Such a policy would slightly reduce the share of diesel in new cars purchases in the short-run (i.e. before supply side adjustments take place), without substantially changing the average fuel consumption or CO2 emission levels of new cars. Alternatively, a carbon tax (at 15 ¬/ton of CO2) could slightly decrease these emissions in the short-run.

Negotiated Red Zones Around Hazardous Plants

Urbanization in exposed areas increases the cost of disasters. For industrial risks, potential victims raise firms’ liabilities. For natural risks, overexposure by some undermines mutualization. Land use policy (particularly exclusion zones) and insurance shape urbanization, but their efficiency is limited by hazard-map precision. Map-based discrimination being politically sensitive, we identify an operation of map redrawing that increases the welfare of all. Climate change and population growth increase risk. We exhibit realistic cases where exclusion zones shrink as risk rises. We disentangle the competing effects at play. Results are established for alternative distributions of bargaining power between households, mayor and firm.The industrialists are liable for any damage they cause to neighboring households. Consequently, households do not have to pay for the risk they create by locating in exposed areas. A common and efficient self-insurance strategy for the firm is to freeze land, or to negotiate land-use restrictions. When people understand only simple messages about risk, the boundaries of the building zone are the ground for negotiation with the mayor. Typical scenarios regarding the distribution of bargaining power between the firm and the mayor are examined. In the comparative statics, we show how red zones are revised as technology or demography change. Further, we give the conditions for a purple zone (limit red zone as the population grows) and a green zone (limit inhabitable zone as the risk grows) to exist.

The Insured Cost of Ground Movements in France from 1995 to 2006

Depending on their causality, ground movements can be stated as natural disasters and insured by the French natural disasters insurance system. This article analyzes the inventoried claims and compensations from 1995 to 2006 and explains the limits of this approach. It assesses the ground movements cost in metropolitan France during this period. This economic assessment is also broken down considering the different types of ground movements.