Search

The topic of environmental insurance is complex in several ways and requires a particular attention. A law and economics perspective could help to solve multiple problems that arise in connection with these kinds of insurance policies and especially the ones covering industrial and technological risks. The first problem is the role of insurance in providing a mechanism through which the potential injurers internalize the risk costs they generate by their activity. Another problem is how to guarantee a sufficient compensation for the victims in case of an accident at a sustainable cost, and which legal regime may provide necessary incentives for prevention. Moreover, environmental risks pertain to the category of potentially catastrophic risks presenting peculiarities that differentiate them from traditional risks: they might have relevant and long-term consequences for the environment and human health. For the insurability, a difficult task is to determine with a sufficient degree of accuracy the probability of occurrence and the magnitude of environmental damages. But the insurability of environmental risks, and especially major accidents, is also very much influenced by changes in the regulatory system. At the European Community level, the Directive 2004/35/CE established a general discipline for the prevention and the remedy of ecological damage at reasonable costs. To guarantee the actual effectiveness of this regime and the consequent insurability, it is important to set specific and equal criteria in all the European Union countries. Problems arise, for example, in connection with the extension of the guarantee to the first-party clean up and to the natural resources recovery regarding protected species and natural habitats.

The diploma thesis is concerned with current topics of business insurance risks. The goal of thesis is to explore actual business risks in the world and ways of protection, analyze development of business insurance market in the Czech Republic, categorize business insurance risks and in conclusion describe selected insurance products in detail, which will influence the market structure of business insurance most in future I suppose. These product are Key person insurance (Keyman), Directors and Officers liability insurance (D&O) and Environmental insurance. My analysis showed that the most important global business risks currently are economic risks, business interruption risks and risks of natural disasters. Businessmen in the following period will have to deal primarily with the threat of regulation and compliance, maintain continued access to credit and recover from economic recession. The business insurance market is growing slightly and also provides great potential for growth in the future. Major trend in the field of business insurance last years is stagnation and decline of insurance rates. It can be expected that the structure of business insurance market will be affected mostly by liability insurance.

Using a structural model of the interactions between governments, firms and insurance companies, we characterize the distortions in environmental liability sharing between firms and insurance companies that the imperfect implementation of government policies implies. These distortions stem from three factors: the presence of moral hazard, the non-congruence between firms/insurers’ objectives and social welfare, and the courts’ imperfect assessment of safety care levels exerted by firms. We characterize cases where the efficient liability sharing factor is above or below its full information perfect implementation level. We derive comparative statics results indicating how sensitive the liability sharing factor is to changes in parameters (parameters that underlie the firm profit level and volatility, the cost of safety care, the monitoring cost, the social cost of public funds, the effectiveness of care in reducing the probability of accident) that are relevant for the characterization of optimal policies (liability sharing, safety care standards) toward environmental protection or the prevention of industrial accidents. We derive policy implications regarding environmental disaster insurance policies. The Geneva Papers (2008) 33, 337–362. doi:10.1057/gpp.2008.9