Natural Disasters and the Supply of Home Insurance

166 Pages Posted: 30 Sep 2005

See all articles by Martin F. Grace

Martin F. Grace

Temple University - Fox School of Business & Management

Robert W. Klein

Georgia State University

Date Written: February 4, 2002


The purpose of this briefing paper is to assess the implications of natural disasters for the supply of home insurance. We focus on the risk of hurricanes and earthquakes. Our analysis begins with a review of the challenges that catastrophes pose for the insurance mechanism and how insurers seek to overcome these challenges. We then examine insurance market conditions in selected jurisdictions in the U.S. and identify problems and areas of concern. Five jurisdictions were selected: California, Florida, North Carolina, Puerto Rico, and the U.S. Virgin Islands. In each jurisdiction, we examine the cost and availability of home insurance, hazard mitigation efforts, regulatory actions, and state government insurance mechanisms. We conclude with an evaluation of policy options to increase the supply of insurance and better manage catastrophe risk. These options and their pros and cons are summarized in Box E.1.

Suggested Citation

Grace, Martin F. and Klein, Robert Warren, Natural Disasters and the Supply of Home Insurance (February 4, 2002). Available at SSRN: or

Martin F. Grace (Contact Author)

Temple University - Fox School of Business & Management ( email )

Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Robert Warren Klein

Georgia State University ( email )

5387 Northchester Ct
Atlanta, GA GA 30338
United States
404-386-1591 (Phone)

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