Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284816 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Insurance [ISSN:] 1539-6975 [Volume:] 88 [Issue:] 4 [Year:] 2021 [Pages:] 863-902
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
This paper analyzes the scope of the private market for pandemic insurance. We develop a framework that explains theoretically how the equilibrium price of pandemic insurance depends on accumulation risk, covariance between pandemic claims and other claims, and covariance between pandemic claims and the stock market performance. Using the natural catastrophe (NatCat) insurance market as a laboratory, we estimate the relationship between the insurance price markup and the tail characteristics of the loss distribution. Then, by using the high‐frequency data tracking the economic impact of the COVID‐19 pandemic in the United States, we calibrate the loss distribution of a hypothetical insurance contract designed to alleviate the impact of the pandemic on small businesses. The pandemic insurance contract price markup corresponds to the top 20% markup observed in the NatCat insurance market. Then we analyze an intertemporal risk‐sharing scheme that can reduce the expected shortfall of the loss distribution by 50%.
Subjects: 
catastrophe risk transfer
pandemic insurance
private–public partnerships
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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