School of Mathematical Sciences Academic Report [2023] No. 062

(High-level University Construction Series Report No. 833)

 Report title: Flood risk insurance: A micro-economic foundation

Speaker：Tim Boonen, Associate Professor, Department of Statistics and Actuarial Science, University of Hong Kong

Reporting time：2023.09.19 15:00-16:00pm

Location: Room 501, Huixing Building (Science and Technology Building)

Report Content：Flood risk has consistently been ranked as one of the major emerging risks, with the potential of having a substantial systemic impact on the insurance industry. In this paper, we provide a micro-economic foundation for a flood risk insurance market. Specifically, we characterize Pareto-optimal risk-sharing contracts in a market with multiple policyholders and one representative insurer. With minimal assumptions on the risk measures of the parties involved, we characterize Pareto optimality in terms of the minimization of a sum of the agents’ risk positions, and we relate it to both the core and coalitional stability of an associated market game. In the special case of coherent risk measures, the optimal indemnity schedules are further characterized in explicit form, in terms of what can be called worst-case probability measures. Finally, we provide a numerical illustration of our results.

Reporter Introduction：Tim Boonen is an associate professor in actuarial science at the University of Hong Kong since June 1, 2023. Before, he worked as assistant and associate professor at the University of Amsterdam from 2013 until 2023. He received his Ph.D. at the Tilburg University. His research interests include mathematical finance, risk-sharing, contract theory, capital allocation, and (applications of) game theory in insurance economics. His work was published in, for instance, ASTIN Bulletin, Demography, Economic Theory, Finance and Stochastics, Insurance: Mathematics and Economics, and Mathematics of Operations Research.

Students and faculty are welcome to attend!

Inviter: Jingchao Li

School of Mathematical Sciences

September 14, 2023