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Insurance Supervision under Climate Change: A Pioneers Detection Method
[La supervision des assurances lorsque le climat est bouleversé : une Méthode de Détection des Pionniers]

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  • Éric Vansteenberghe

Abstract

This research introduces a novel supervisory tool, the Pioneers Detection Method, aimed at enhancing resilience in insurance markets dealing with the uncertainties of climate change. The paper builds on a theoretical model of the insurance market, where independent experts set premiums based on their individual risk evaluations. The segmented nature of the private insurance market slows the estimations of the tail parameter of the loss distribution, and there's no direct way to eliminate bias, as extreme events are infrequent. The proposed supervisory tool uses temporal changes to consolidate expert opinions, pinpointing those who rapidly and accurately identify extreme climate-related events. The effectiveness of the Pioneers Detection Method is affirmed through a series of simulations, where it surpasses traditional pooling methods within a Bayesian framework. This supervisory approach also proves to be the most beneficial in improving welfare in a fragmented insurance market comprised of a few private insurance companies. Ce papier introduit une méthode de supervision novatrice, la Méthode de Détection des Pionniers, visant à renforcer la résilience du marché d'assurance face aux incertitudes du changement climatique. L'article s'appuie sur un modèle théorique du marché de l'assurance, où des experts indépendants fixent les primes en fonction de leurs évaluations individuelles des risques. La nature segmentée du marché de l'assurance privée ralentit les estimations du paramètre de queue de la distribution des pertes, et il n'y a pas de moyen direct d'éliminer les biais, car les événements extrêmes sont rares. L'outil de supervision proposé utilise des changements temporels pour consolider les opinions d'experts, en identifiant ceux qui repèrent rapidement et avec précision les événements climatiques extrêmes. L'efficacité de la Méthode de Détection des Pionniers est confirmée par une série de simulations, où elle surpasse les méthodes de regroupement traditionnelles dans un cadre bayésien. Cette approche de supervision s'avère également être la plus bénéfique pour améliorer le bien être dans un marché d'assurance fragmenté composé de quelques compagnies d'assurance privées.

Suggested Citation

  • Éric Vansteenberghe, 2024. "Insurance Supervision under Climate Change: A Pioneers Detection Method [La supervision des assurances lorsque le climat est bouleversé : une Méthode de Détection des Pionniers]," Débats Economiques et financiers 43, Banque de France.
    • Handle: RePEc:bfr:decfin:43

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    1. Henri Fraisse & Christophe Hurlin, 2024. "Modèles internes des banques pour le calcul du capital réglementaire (IRB) et intelligence artificielle," Débats Economiques et financiers 44, Banque de France.

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    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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