Abstract
In this thesis, I consider the impact of the COVID-19 pandemic on small businesses, as they are acutely at risk due to the lack of implicit government insurance that would be available to larger corporations. I will discuss insurance's characteristics using the basic theory of insurance, analyze pandemic insurance's viability in the private market, and critique alternative solutions. While the theory suggests that pandemics are not insurable in the private market, I will perform specific analysis to determine if this is the case or not. Using a simulation of the economic landscape firms face, business owners with varying levels of risk aversion evaluate whether or not to buy pandemic insurance. Specifically, I use the CRRA utility function to model risk aversion and calculate the demand for insurance and the insurance company's viability. I find that while the demand exists for a pandemic insurance product, being the counterparty is a losing proposition in the wholly private insurance market. Future research evaluating alternative solutions, including catastrophe bonds and potential public-private partnerships, is needed to determine the most effective financing for small businesses for future pandemic events.
Thesis Completion
2021
Semester
Spring
Thesis Chair/Advisor
Guldi, Melanie
Degree
Bachelor of Science (B.S.)
College
College of Business Administration
Department
Economics
Language
English
Access Status
Open Access
Release Date
5-1-2021
Recommended Citation
Sperry, Ashlyn, "Small Business Risk In The Context of a Pandemic: A Simulation" (2021). Honors Undergraduate Theses. 1010.
https://stars.library.ucf.edu/honorstheses/1010