Post by Sapphire Capital on Sept 27, 2008 0:14:47 GMT 4
Can Environmental Insurance Succeed Where Other Strategies Fail? The Case of Underground Storage Tanks
Howard Kunreuther
University of Pennsylvania - The Wharton School - Center for Risk Management; National Bureau of Economic Research (NBER)
Alexander Pfaff
Duke University - Department of Psychology and Neuroscience
Haitao Yin
University of Michigan - Erb Institute for Global Sustainable Enterprises
September 9, 2008
Abstract:
Private risk reduction will be socially efficient only when firms are liable for all the damage that they cause. We find that environmental insurance can achieve efficiency even when fines and management mandates do not. The evolution of the U.S. Environmental Protection Agency's and states' Underground Storage Tank programs suggests that despite the hurdles for novel insurance products, mandating environmental insurance can succeed. The possession of insurance is much easier to monitor than the implementation of a mandate to do socially efficient risk management. Insurance also addresses the problem of small firms declaring bankruptcy, which limits the economic incentive of large ex-post, i.e. damage-based, fines.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1265658_code1103042.pdf?abstractid=1273768&mirid=1
Howard Kunreuther
University of Pennsylvania - The Wharton School - Center for Risk Management; National Bureau of Economic Research (NBER)
Alexander Pfaff
Duke University - Department of Psychology and Neuroscience
Haitao Yin
University of Michigan - Erb Institute for Global Sustainable Enterprises
September 9, 2008
Abstract:
Private risk reduction will be socially efficient only when firms are liable for all the damage that they cause. We find that environmental insurance can achieve efficiency even when fines and management mandates do not. The evolution of the U.S. Environmental Protection Agency's and states' Underground Storage Tank programs suggests that despite the hurdles for novel insurance products, mandating environmental insurance can succeed. The possession of insurance is much easier to monitor than the implementation of a mandate to do socially efficient risk management. Insurance also addresses the problem of small firms declaring bankruptcy, which limits the economic incentive of large ex-post, i.e. damage-based, fines.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1265658_code1103042.pdf?abstractid=1273768&mirid=1