Faure, Michael; Heine, Klaus --- "An insurance approach for preventing financial crises" [2013] ELECD 448; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Financial Crisis Containment and Government Guarantees" (Edward Elgar Publishing, 2013) 174

Book Title: Financial Crisis Containment and Government Guarantees

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781004999

Section: Chapter 13

Section Title: An insurance approach for preventing financial crises

Author(s): Faure, Michael; Heine, Klaus

Number of pages: 15

Abstract/Description:

With the financial crisis, the amount of subsidies provided by government has increased considerably. Governments also provide compensation in other types of crises, for example after a natural catastrophe. We argue in this chapter that the economic approach towards compensation of victims in case of natural catastrophes can also provide an important contribution to the interventions of a government during the financial crisis. That is, also for risks emerging from the financial crisis, insurance may provide an attractive solution. In a recent paper Michel-Kerjan has programmatically pointed to this idea: [T]he matter of financing large-scale disasters has relevance for many other catastrophes: hurricanes, earthquakes, pandemics, terrorist attacks, technological accidents, and even financial crises [emphasis added]. In all of these settings, one fundamental question arises: Who will pay for the economic consequences of future catastrophes and how best to organize this payment? . . . Catastrophe economics, which seeks to shed light on these issues, is likely to become a more significant field of research in the coming years.