Managing Environmental Risk Through Insurance by Paul K. Freeman

By Paul K. Freeman

Can assurance be used as a method to acquire compliance with environmental coverage? Answering this query calls for exam of a wide mosaic of educational concerns, together with present structures on hand for delivering repayment and deterrence, use of contracts (including coverage) as substitutes for tort legislation, barriers of regulatory policy-making by way of govt companies, pre-conditions for production of assurance items, and marketplace mechanisms valuable for coverage to be bought or offered. the aim of Managing Environmental RiskThrough Insurance is to spotlight the aptitude function that assurance and function criteria can play in handling environmental possibility. coverage can play an important function in facing some of the most challenging concerns dealing with society at the present time - the way to catch up on environmental exposures.
This ebook analyzes the power of coverage to play a job in coping with environmental threat. It starts off by means of outlining the function coverage performs in society not like different societal instruments for addressing hazard: govt profit courses and imposition of involuntary legal responsibility utilizing the court docket method. by means of so doing, the e-book describes the comparative benefits of assurance. The ebook then analyzes the insurability of the hazards. ultimately, the e-book applies the insurability research to 3 concrete environmental examples.

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24 This represents an inverse of the tort liability claims payment ratio discussed earlier. In each instance, the litigation expenses for the insurance companies (including their duty to defend their policy holders) remain part of the insurer's administration and underwriting costs, separate from claims paying. 25 Conclusion Insurance may prove to be demonstrably more efficient than the tort liability system in allocating collected funds to damage remediation or compensation. The evidence suggests that insurance may provide as much as 66 percent of collected funds for damage reimbursement, while the tort liability system provides only 40 percent of collected funds for the same purposes.

20 MANAGING ENVIRONMENTAL RISK THROUGH INSURANCE III. SUMMARY The tort system has evolved the ground rules for strict liability through the enterprise liability concept used in product liability cases. Enterprise liability eventually extended to include environmental liability. Standards of care required to assign strict liability in environmental cases have arisen through environmental legislation, regulation, or through court interpretation. The transaction costs and legal expenses incurred through the use of the court system have been substantial.

MARKETABILITY CONDITIONS Even if an insurer determines that a particular risk meets insurability conditions. the insurer will not invest the time and money to develop a product unless convinced that there is sufficient demand to cover the cost. Demand for Coverage There are several factors that normally trigger a business' interest in purchasing insurance. Businesses that have limited assets and/or are risk averse are anxious to transfer the risk of high consequence events to another party rather than bearing it themselves.

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