Lucie Calvet et Céline Grislain-Letrémy
France's overseas départements (DOMs) are more exposed to natural hazards than metropolitan France (mainland + Corsica). Yet only 52% of DOM households have taken out insurance for their main residence-which includes mandatory coverage of natural disasters-compared with 99% of households in metropolitan France. Some local studies attribute this low policy-holding rate to high premiums. As living standards are lower in the DOMs than in metropolitan France, DOM households may also be unable to afford insurance. Our study shows that premiums are minimally adjusted (if at all) to exposure to natural hazards, and that they account for a modest share of the budgets of insured and uninsured households alike. The results point to traditional private housing as one of the reasons for the low policy-holding rate in the DOMs. Many households build their homes themselves, sometimes without a building permit, and their dwellings may therefore be uninsurable. Another determinant is tenure status. Tenants or home-buyers are more likely to be insured, as tenants are required to take out insurance, and banks may request home insurance before granting a mortgage loan. Other possible explanations of the low policy-holding rate in the DOMs are perception bias and the expectation of financial aid in the event of natural disaster. Our study does not enable us to determine the effect of these factors on insurance demand. But we show that, even taking into account a natural-disaster probability lower than the historical probability and the payment of relief to the uninsured, a very large majority of uninsured would gain from being covered against natural disasters. The mean annual gain ranges from a few hundred to several thousand euros depending on the scenarios.