Flood Insurance Models
Hi @graham,
In the effect of risk reduction - Limit High Risk Eligibility, it is mentioned "Reduced Costs". Could you please further explain what cost the wiki is referring to? From my understanding, de-risking reduces the annual costs of premium cap. For example, there would be less need of subsidies and cross-subsidization through Levy.
How does the government automatic backstop work and how is it different from subsidies?
Why is the public insurer model most costly to govt?
Why does public reinsurer provide more incentives for risk reduction?
Comments
1) It is referring to actuarial costs. If you employ risk mitigation techniques, i.e. flood proofing your home, then the severity of a loss is reduced
2) A government backstop would mean that they are guaranteeing to cover all losses, beyond those that can be borne by the insurers
3) It is the results of the actuarial models on page 69
4) It is on page 66 - The source talks about how full risk based pricing for the layer 25K XS 0 will be very costly and will serve as an effective price-signal to homeowners of their risk exposure, providing incentive to mitigate, avoid or self insure the risk while still providing catastrophic costs in the second layer
I encourage you to read the wiki, and read the source after. A lot of the details you are asking for is in the source material