Environmental Risks and Insurance

A Comparative Analysis of the Role of Insurance in the Management of Environment-Related Risks

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From the increasing incidence of environmental pollution and soil contamination, to recurring natural disasters, the risks posed by the constant interaction between human activities and the environment are diverse, manifold and often catastrophic in their consequences. Therefore, the elaboration of effective risk-management plans, aimed at formulating viable response strategies, requires the contribution of all the economic actors involved: private parties, financial institutions, governments and international organizations.

This report focuses on the role of insurance and reinsurance companies in the management of environmental risks - environmental pollution risk and natural catastrophe risk in particular.

It discusses the issue of insurability of such risks, analyses the increasing risk of liability for environmental pollution and the underlying trends in the development of environmental liability regimes in OECD countries. It also presents an overview of the various environmental pollution insurance products and techniques developed in response to legal and factual evolutions. In addition, it describes the special features of natural catastrophe risks, the role of traditional insurance markets in the coverage of such perils, and alternative options of coverage, from governmental disaster schemes to new financial market instruments.

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In the recent times, the complex relationship between human activities and the environment has become a major public concern, raising issues of legal, political and economic relevance.The adverse impact of industrial activities on natural resources and biodiversity, as well as the need for sustainable development, stimulated a debate on appropriate policies and techniques aimed at improving the current level of environmental protection and preservation. Conversely, a growing concern has developed over the effects of such extreme natural events as hurricanes, typhoons, floods and earthquakes which pose a serious threat to human life and property, being able to disrupt local communities and to affect the economic stability and growth of entire nations...

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