Prevention and insurance of natural disasters.

Summary This thesis deals with prevention and insurance of natural disasters. Low current levels of prevention measures and insurance coverage are explained by numerous market failures and poorly-designed public policies. Modeling individual behaviors, markets and public policies, this thesis aims at characterizing prevention actions and insurance mechanisms that could mitigate efficiently losses and wealth variability for risk averse agents. Chapter 1 investigates preventive behaviors in the context of city development. It shows that risky areas are more developed nearer to the city center than further away and that investment in building resilience leads to more compact cities. This chapter also highlights the perverse effects of insurance subsidies leading to risk over-exposure and the role that can be played by urban policies such as density restrictions and building codes. The following chapters focus on insurance mechanisms when individual risks are not independent, a main feature of natural disaster risks. Chapter 2 shows that, without market failures, Pareto optimal allocation of risks is reached thanks to stock insurance companies in competition and a reduced number of financial assets. In practice, agents have limited liability and public policies require agents to secure financial reserves to limit payment defaults in catastrophic states. That is why chapters 3 and 4 investigate the issue of the cost of financial reserves. Chapter 3 analyzes how the cost of financial reserves affects the insurance demand of agents exposed to correlated risks. If the financial reserves for the collective risk leads to an additional premium in the price of insurance for one agent, it appears that for a given collective risk, the purchased coverage rate decreases when the individual probability of being affected decreases. Chapter 4 examines the optimal design of insurance contracts when individual risks are correlated in a community. If it is not costly for the community to build reserves, the optimal contract for a given individual risk consists in full coverage, whatever the collective losses, plus a dividend if necessary to redistribute the remaining part of the reserves. Otherwise, the optimal contract for a given individual risk consists in partial coverage when collective losses are high.