Valuing risk

Environmental Risks and Insurance: A Comparative Analysis of the Role of Insurance in the Management of Environment-Related Risks
Insuring the environment is a high-risk business; not only is it a gamble on whether and how one’s client will pollute, it also means having to pay increasingly high costs for cleaning up oil spills, detoxifying chemical leaks and decontaminating groundwater. Can insurance companies continue to afford such coverage?
Yes, says Environmental Risks and Insurance, but it will take coordination between the insurance industry and government policymakers.Unsurprisingly, many firms would rather not have to pay for pollution insurance. One of the difficulties in marketing environmental liability packages, according to Environmental Risks and Insurance, is that the risk of gradual pollution is too often a low-probability, high-consequences risk. Generally, such risks are felt to be easily under-estimated or even ignored. In a catch-22 for those marketing such insurance, once a potential client has been declared insurable, the policy may be turned down on the logic that if the company is insurable, it must be low risk and the insurance an unnecessary expense.It goes both ways, of course. Where purchase of pollution coverage is a condition to operate, the insurer may decide a firm is too high-risk and refuse coverage, turning insurance companies into de facto environmental policemen.Not necessarily a bad thing, as it enforces the polluter-pays principle espoused by the OECD. Furthermore, Environmental Risks and Insurance suggests that other financial instruments could be used to secure financial coverage for environmental damage, such as a bank-issued guarantee, an advance deposit in an environmental account or even with personal or collateral security. Environmental liability regimes in OECD countries seek to both assure the availability of such insurance cover and compensate for damages caused by pollution. Until recently, according to Environmental Risks and Insurance, much legislation focused on simple negligence on the part of the polluter, which was often difficult to prove and put the task of suing for compensation on the injured parties. New environmental legislation imposes the standard of strict liability, which shifts that responsibility back to the owners and operators of environmentally dangerous activities. In the case of oil spills, this means that the owner of the tanker that pollutes is liable regardless of whether or not he was actually at fault. The claimants can thereby be compensated promptly, without the need for lengthy and costly litigation.© OECD Observer No. 240/241, December 2003

Economic data

GDP growth: +0.6% Q4 2017 year-on-year
Consumer price inflation: 2.2% Jan 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.5% Jan 2018
Last update: 12 Mar 2018


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Ambassador Aleksander Surdej, Permanent Representative of Poland to the OECD, was a guest on France 24’s English-language show “The Debate”, where he discussed French President Emmanuel Macron’s speech at the World Economic Forum in Davos.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Rousseau
  • Do you trust your government? The OECD’s How's life 2017 report finds that only 38% of people in OECD countries trust their government. How can we improve our old "Social contract?" Read more.
  • Papers show “past coming back to haunt us”: OECD Secretary-General Angel Gurria tells Sky News that the so-called "Paradise Papers" show a past coming back to haunt us, but one which is now being dismantled. Please watch the video.
  • When someone asks me to describe an ideal girl, in my head, she is a person who is physically and mentally independent, brave to speak her mind, treated with respect just like she treats others, and inspiring to herself and others. But I know that the reality is still so much different. By Alda, 18, on International Day of the Girl. Read more.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Read some of the insightful remarks made at OECD Forum 2017, held on 6-7 June. OECD Forum kick-started events with a focus on inclusive growth, digitalisation, and trust, under the overall theme of Bridging Divides.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2018