Climate change increases the value of fine-scale risk information in household insurance, but its competitive use may weaken pooling and reduce effective availability in exposed areas. We study this mechanism in the French Cat-Nat system, where natural-catastrophe coverage is formally pooled through a regulated surcharge but accessed through the underlying household-insurance contract. First, we use controlled online quote requests to compare otherwise identical addresses with different flood or clay shrink-swell exposure. The evidence shows heterogeneous insurer responses: coarse pooling, within-commune premium differentiation, and non-quoting in some exposed micro-locations. Second, we develop a stylized dynamic pricing game with insurers that differ in pricing granularity. Numerical equilibria show that fine segmentation attracts low-risk households, shifts high-risk households toward less granular insurers, and erodes implicit cross-subsidies. Market-share constraints mainly slow this reallocation. The results highlight why climate-insurance governance must monitor local availability, not only formal coverage or aggregate market presence.
Tomorrow, Raphaël Dalbarade will attend the European Geosciences Union (EGU) Annual Meeting, in Vienna, to present “When Climate Hazard Granularity Challenges Risk Pooling: A Spatial Perspective“, a joint work with Laurence Barry, Caroline Hillairet, Hamza El Hassani, Azeddine Bamansor, Quentin Hénaff, and Simon Blaquière. More very soon…
The French “CatNat” regime provides mandatory natural disaster coverage based on national solidarity, using a uniform rate for all homeowners. However, the increasing availability of high-resolution geoscience data challenges this uniformity. This is notably the case for Clay Shrink-Swell (CSS) risk, which has become a primary cost driver in the last years. Does the shift from national pooling to granular risk segmentation threaten the viability of such solidarity regimes?
To answer this question, we combine empirical analysis with theoretical modeling. First, utilizing a large-scale collection of insurance quotes, we identify a fragmented market where insurers leveraging granular hazard maps coexist with traditional “pooling” actors. Second, to capture the long-term dynamics of this fragmentation, we develop a game-theoretic model of market equilibrium. This model allows us to explicitly simulate how risk selection strategies impact affordability and access to coverage. Our findings suggest that while granular segmentation improves pricing accuracy, it risks creating “insurance deserts” for vulnerable areas. Finally, this technical evolution undermines the regime’s solidarity principle, potentially reducing the socio-economic resilience of communities facing increasing climate geohazards.
Mercredi, je donnerai la première partie de l’exposé Risque climatique, retrait des assureurs et granularité des tarifs, organisé par la Chaire PARI. Je donnerai un point de vue un peu général sur le problème qui nous préoccupe, à savoir la modélisation d’un marché concurrentiel d’assurance, et la recherche de politiques optimales, pour un régulateur, pour que l’équilibre concurrentiel soit optimal (ou a minima améliore certains critères) pour le bien être global. Raphaël Dalbarade présentera ensuite ses travaux sur le sujet.
"sendo l'intento mio scrivere cosa utile a chi la intende…"
