| High losses generated by natural catastrophes reduce the availability of insurance. Among the ways to manage risk, the subscriptions of participating and non-participating contracts respectively permit to implement the two major principles in risk allocation: the mutuality and the transfer principles. Decomposing a global risk into its idiosyncratic and systemic components, we show that: the participating contract hedges the individual losses under a variable premium and the systemic risk is covered with a non-participating contract under a fixed premium. Based on Doherty and Schlesinger (2002) and Mahul (2002) approaches, our model replaces the non-participating contract by a financial one based on an index closely correlated to the systemic risk, under a... |
