Insurability of damage caused by climate change: A commentary

University of Pennsylvania Law Review

Volumn 155, Issue 6, 2007, Pages 1875-1899

  Faure, Michael G ^a  

^a MAASTRICHT UNIVERSITY   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34548077167     PISSN: 00419907     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (119)

1. INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE [IPCC], WORKING GROUP I, CLIMATE CHANGE 2001: THE SCIENTIFIC BASIS 574-75 (J.T. Houghton et al. eds., 2001); see generally id. at 87-97 (providing an overview of the climate system, as well as natural and human-induced climate variations).
2. For a discussion of the likelihood of an increase in tropical cyclones, see id. at 606.
3. November 6-17, 2006.
4. See UNITED NATIONS ENVT. PROGRAMME FIN. INITIATIVE CLIMATE CHANGE WORKING GROUP, ADAPTATION AND VULNERABILITY TO CLIMATE CHANGE: THE ROLE OF THE FINANCE SECTOR 14 (2006) ("[I]t seems very likely that the [sic] there will be a 'peak' year that will record costs over 1 trillion USD before 2040.").
5. See Howard C. Kunreuther & Erwann O. Michel-Kerjan, Climate Change, Insurability of Large-Scale Disasters, and the Emerging Liability Challenge, 155 U. PA. L. REV. 1797 (2007) (tying insurers' cognizance of climate change to the litigation of the liability of directors and officers for failure to prepare for the phenomenon).
6. For examples of these studies, see ALLIANZ GROUP & WORLD WIDE FUND FOR NATURE, CLIMATE CHANGE & THE FINANCIAL SECTOR: AN AGENDA FOR ACTION 25 (2005) (suggesting means by which insurers can offset exposure to the risks associated with climate change) and PARTNERRE, IS PARTNERRE AT RISK? CLIMATE CHANGE: IMPACTS ON REPUTATION, UNDERWRITING AND INVESTMENT RESULTS 11-22 (2003) (exploring the impacts of climate change on PartnerRe). The insurability issue also received attention from the Secretariat of the UNFCCC See generally Joanne LinneroothBayer et al., Insurance-Related Actions and Risk Assessment in the Context of the UNFCCC 1 (May, 2003) (Background Paper for UNFCCC workshops, commissioned by the UNFCCC Secretariat), available at http://unfccc.int/files/meetings/workshops/ other_meetings/application/pdf/background.pdf (discussing the role of insurance as a risk-transfer mechanism in the context of catastrophes resulting from climate change).
7. In the remainder of this Commentary, I will still refer to this type of damage as "damage caused by climate change," although the reader should realize that from an insurability perspective, it does not matter whether or not it is climate change that causes the increase in these extreme weather-related events.
8. Indeed, it was thepotential liability for climate change damage that was the central focus of the Symposium and theissue discussed by Professors Kunreuther and Michel-Kerjan. See Kunreuther & Michel-Kerjan, supra note 5, at 1843 (discussing the potential liability of firms for theharms visited upon the firms they insure).
9. See, e.g., Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9607(a) (2000) (providing for retroactive liability). See generally Richard L. Revesz & Richard B. Stewart, Introduction, in ANALYZING SUPERFUND: ECONOMICS, SCIENCE, AND LAW 3 (Richard L. Revesz & Richard B. Stewart eds., 1995) (providing critical analyses of CERCLA's retroactive liability). A strict retrospective liability was laid down for the restoration of contaminated sites in the United Kingdom's Environment Act of 1995.
10. See B. Jones, The Identification and Remediation of Contaminated Sites: The United Kingdom's Environment Act of 1995, TLJDSCHRIFT VOOR MILIEUAANSPRAKELIJKHEID [Envtl. Liability Review] 159, 159-63 (1995) (summarizing the Act's main provisions).
11. For examples and a discussion of this "retroactive case law," see Gerrit Betlem & Michael Faure, Environmental Toxic Torts in Europe: Some Trends in Recovery of Soil CleanUp Costs and Damages for Personal Injury in the Netherlands, Belgium, England and Germany, 10 GEO. INT'L ENVL. L. REV. 855 (1998).
12. For a discussion of the economics of legal transitions with applications to tort law, see generally Louis Kaplow, An Economic Analysis of Legal Transitions, 99 HARV. L. REV. 509, 520-63 (1986).
13. See James Boyd & Howard Kunreuther, Retroactive Liability or the Public Purse?, 11 J. REG. ECON. 79, 80 (1997) (arguing that retrospective liability "weaken[s] the incentive to take precautions against future environmental costs").
14. See generally Steven Shavell, Liability and the Incentive To Obtain Information About Risk, 21 J. LEGAL STUD. 259 (1992) (modeling the relative efficacies of various negligence rules).
15. For examples of such a prospective overruling in German case law, see 5 JAMES BOYD ET AL., TORT AND INSURANCE LAW: DETERRENCE, INSURABILITY, AND COMPENSATION IN ENVIRONMENTAL LIABILITY: FUTURE DEVELOPMENTS IN THE EUROPEAN UNION 59-60 (Michael Faure ed., 2003).
16. See also Claus Ott & Hans-Bernd Schäfer, Negligence as Untaken Precaution, Limited Information, and Efficient Standard Formation in the Civil Liability System, 17 INT'L REV. L. & ECON. 15, 16 (1997) (arguing that the collective court system can create more efficient determinations of negligence assessment than individual courts).
17. For related discussions, see, for example, Daniel A. Farber, Basic Compensation for Victims of Climate Change, 155 U. PA. L. REV. 1607, 1644-50 (2007) (asserting that injuries from climate change should be adequately compensated) and RODA VERHEYEN, CLIMATE CHANGE DAMAGE AND INTERNATIONAL LAW: PREVENTION DUTIES AND STATE RESPONSIBILITY 178-83 (2005) (discussing the retroactivity issue in the context of the requirement of foreseeability for establishing international climate change liability).
18. See Richard S.J. Tol & Roda Verheyen, State Responsibility and Compensation for Climate Change Damages: A Legal and Economic Assessment, 32 ENERGY POL'Y 1109, 1123-25 (2004) (providing data describing the share of industrial carbon dioxide emissions in theworld).
19. Cf. Joni Hersch & W. Kip Viscusi, Allocating Responsibility for the Failure of Global Warming Policies, 155 U. PA. L. REV. 1659, 1668 (2007) (arguing that the debate on liability for climate change has a more prospective than retrospective nature).
20. VERHEYEN, supra note 15, at 183.
21. On these goals, see Gary T. Schwartz, Mixed Theories of Tort Law: Affirming Both Deterrence and Corrective Justice, 75 TEX. L. REV. 1801, 1801-02 (1997) (discussing the goals of retribution and deterrence, and then proposing a mixed theory of tort law that incorporates both).
22. See, e.g., Farber, supra note 15, at 1645 (arguing that "a rule that requires compensation for past emissions can provide a precedent for future liability schemes that cover other emerging environmental harm").
23. See Boyd & Kunreuther, supra note 12, at 82-83 (noting that retroactive liability reduces firm value, thus reducing in equal measure the firm's incentive to protect against future environmental costs).
24. See generally Michael Faure & Paul Fenn, Retroactive Liability and the Insurability of Long-Tail Risks, 19 INT'I. REV. L. & ECON. 487, 490-93 (1999) (modeling the insurability of retroactive liability).
25. The reference here is to the type of liability discussed in Kunreuther & Michel-Kerjan, supra note 5, at 1843.
26. See Richard Zeckhauser, 19th Annual lecture of the Geneva Association: Insurance and Catastrophes, 78 GENEVA PAPERS ON RISK & INS. 3, 5 (1996) (arguing that retrospective liability may affect the predictability of the risk). For a similar conclusion on the insurability of retrospective (environmental) liability risks,
27. see Kenneth S. Abraham, Environmental Liability and the Limits of Insurance, 88 COLUM. L. REV. 942, 957-59 (1988) (arguing that retroactive liability, such as the scheme established by CERCLA, frustrates the insurance function because its costs are unanticipated and it is very difficult to insure)
28. and Martin T. Katzman, Pollution Liability Insurance and Catastrophic Environmental Risk, 55 J. RISK & INS. 75, 85 (1988) (discussing the difficulty of calculating risk and loss distribution of future chemical disasters).
29. Here I only consider liability of emitters (given the focus on insurability). Similar questions related to the goals of climate change liability, however, also arise when addressing state liability under international law.
30. See, e.g., David A. Grossman, Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change Litigation, 28 COLUM. J. ENVTL. L. 1, 22-33 (2003) (providing an overview of causation and the determination of liability for climate-change-related damages);
31. Jaap Spier, Legal Aspects of Global Climate Change and Sustainable Development, INDRET, Apr. 24, 2006, at 1, 9-10, http://www.indret.com/pdf/346_en.pdf (asserting that, "for the time being," global warming is too complex an issue to attribute causality to a specific polluter).
32. IPCC, WORKING GROUP I, supra note 1, at 59-61.
33. A defendant could be either a particular state (in the context of international climate change liability) or a corporation (like an energy producer). For a discussion of the difference between the two types of liability, see Eric A. Posner & Alan O. Sykes, An Economic Analysis of State and Individual Responsibility Under International Law 5-31 (Univ. of Chicago Law Sch., John M. Olin Law & Economics Working Paper No. 279 (2d Series) and Stanford Univ. Law Sch., John M. Olin Program in Law & Econ. Paper No. 318, 2006), available at http://ssrn.com/abstract=885197.
34. See Grossman, supra note 26, at 31-33 (noting the possibility-in the context of climate-change-related harms-of apportioning damages among the defendants on the basis of the relative sizes of their market shares).
35. See Steven Shavell, An Analysis of Causation and the Scope of Liability in the Law of Torts, 9 J. LEGAL STUD. 463, 472-75 (1980) (providing examples illustrating this assertion);
36. Steven Shavell, Uncertainty over Causation and the Determination of Civil Liability, 28 J.L. & ECON. 587, 588-90 (1985) (critiquing the "threshold probability" theory of liability).
37. For discussions of the proportional liability rule, see William M. Landes & Richard A. Posner, Tort Law as a Regulatory Regime for Catastrophic Personal Injuries, 13 J. LEGAL STUD. 417, 425-31 (1984),
38. John Makdisi, Proportional Liability: A Comprehensive Rule to Apportion Tort Damages Based on Probability, 67 N.C. L. REV. 1063, 1067-75 (1989),
39. Glen O. Robinson, Probabilistic Causation and Compensation for Tortious Risk, 14 J. LEGAL STUD. 779, 791-95 (1985),
40. and Robert Young, Michael Faure & Paul Fenn, Causality and Causation in Tort Law, 24 INT'L REV. L. & ECON. 507, 516-20 (2004).
41. Problems of causal uncertainty and the potential benefits of a proportional liability rule to deal with climate change damage are also discussed in contributions to this Symposium by Kirsten Engel and Daniel Farber. See Kirsten Engel, Harmonizing Regulatory and Litigation Approaches to Climate Change Mitigation: Incorporating Tradable Emissions Offsets into Common Law Remedies, 155 U. PA. L. REV. 1565, 1586-94 (2007) (discussing causal uncertainty and possible legal responses); Farber, supra note 15, at 1632.
42. See Abraham, supra note 24, at 959-60 (explaining that the risk calculations involved in assessing the likelihood of liability under CERCLA's joint and several liability regime were so difficult that insurers ceased to offer coverage); Katzman, supra note 24, at 89-90 (arguing that judicial decisions, such as the adoption of joint and several liability theories, have diminished the insurability of pollution liability).
43. Some have argued that shifting the risk of proving causal uncertainty to a defendant has the effect of requiring the defendant's insurer to insure the entire market. See MICHAEL G. FAURE & TON HARTLIEF, INSURANCE AND EXPANDING SYSTEMIC RISKS 125-27 (2003) (reviewing pertinent literature).
44. Kunreuther & Michel-Kerjan, supra note 5, at 1828-33.
45. See Howard Kunreuther, Mitigating Disaster Losses Through Insurance, 12 J. RISK & UNCERTAINTY 171, 178-80 (1996) (contending that low-probability, high-consequence events lead individuals to ignore insurance options and cause insurers to avoid offering coverage in order to limit their exposure);
46. see also Christian Gollier, Some Aspects of the Economics of Catastrophe Risk Insurance, in CATASTROPHIC RISKS AND INSURANCE 13, 17-18, 23 (OECD ed., 2005) (noting that imperfect scientific knowledge makes it difficult for insurers to gauge the risk involved and highlighting the increased transaction costs that insurers face in the event of a catastrophe).
47. See Kenneth A. Froot, The Market for Catastrophe Risk: A Clinical Examination, 60 J. FIN. ECON. 529, 555-59 (2001) (citing capital market shortages as a potential explanation for limited reinsurance capacity);
48. Kenneth A. Froot & Steven E. Posner, The Pricing of Event Risks with Parameter Uncertainty, 27 GENEVA PAPERS ON RISK & INS, THEORY 153, 154 (2002) (arguing that catastrophic risk pricing is determined by reinsurers rather than the market, the consequence of which is that reinsurance prices are inordinately high).
49. See ERIK BANKS, ALTERNATIVE RISK TRANSFER: INTEGRATED RISK MANAGEMENT THROUGH INSURANCE, REINSURANCE, AND THE CAPITAL MARKETS 115-70 (2004) (discussing the use of capital markets, including catastrophe bonds, contingent capital, and catastrophe derivatives, to cover catastrophic loss);
50. ERIK BANKS, CATASTROPHIC RISK: ANALYSIS AND MANAGEMENT 111-46 (2005) (same);
51. Michael G. Faure, Alternative Compensation Mechanisms as Remedies for Uninsurability of Liability, 29 GENEVA PAPERS ON RISK & INS. 455, 456-57 (2004) (analogizing from the way capital markets could be used to provide coverage for nuclear power plants).
52. See Louis Kaplow, Incentives and Government Relief for Risk, 4 J. RISK & UNCERTAINTY 167, 172-73 (1991) (concluding that government relief for risk creates inefficiencies because individuals do not bear full responsibility for their insurance decisions) ;
53. George L. Priest, The Government, the Market, and the Problem of Catastrophic Loss, 12 J. RISK & UNCERTAINTY 219, 228-29 (1996) (arguing that effective risk reduction is achieved more easily by market discipline than by government intervention).
54. However, one could argue that the additional layer of compensation provided by the state reduced the amount of damages that had to be compensated through insurers, which in turn reduced the insurance capacity needed.
55. For details of these conventions and for an economic analysis, see, for example, Michael G. Faure, Economic Models of Compensation for Damage Caused by Nuclear Accidents: Some Lessons for the Revision of the Paris and Vienna Conventions, 2 EUR. J. L. & ECON. 21, 24-25 (1995)
56. and Michael Trebilcock & Ralph A. Winter, The Economics of Nuclear Accident Law, 17 INT'L REV. L. & ECON. 215, 215-17 (1997).
57. Anne Gron & Alan O. Sykes, A Role for Government?, REGULATION, Winter 2002-2003, at 44, 51.
58. Id.
59. See Karin Ammerlaan & Willem van Boom, De Nederlandse Herverzekeringsmaatschappij voor Terrorismeschade: en de rol van de overheid bij het vergoeden van terreurschaden, 78 NEDERLANDS JURISTENBLAD 2330, 2335-36 (2003) (arguing that the Dutch government should not intervene in insurance markets by providing reinsurance for the terrorism risks).
60. See Kunreuther, supra note 36, at 183 (noting the stability and security offered by the Florida hurricane catastrophe trust fund created by state legislation); Howard Kunreuther, Neil Doherty & Anne Kleffner, Should Society Deal with the Earthquake Problem?, REGULATION, Spring 1992, at 60, 68 (arguing in favor of the creation of a federal reinsurance agency as a reinsurer of last resort);
61. Reimund Schwarze & Gert G. Wagner, In the Aftermath of Dresden: New Directions in German Flood Insurance, 29 GENEVA PAPERS ON RISK & INS. 154, 163 (2004) (contending that the government must be involved as the "final insurer," but only in the case of large damages). But cf. Scott E. Harrington, Rethinking Disaster Policy, REGULATION, Spring 2000, at 40, 40-46 (arguing that government intervention promotes inefficient risk management because political pressures lead temporary measures to become permanent, which distorts the private insurance market).
62. See Kunreuther & Michel-Kerjan, supra note 5, at 1830 (discussing the National Association of Insurance Commissioners task force); see also Erwann Michel-Kerjan & Nathalie de Marcellis-Warin, Public-Private Programs for Covering Extreme Events: The Impact of Information Distribution on Risk Sharing, 1 ASIA-PAC. J. RISK & INS. 21, 41 (2006) (citing the terrorism risk insurance programs in Spain, Australia, France, the United Kingdom, and the United States).
63. See Robert L. Rabin & Suzanne A. Bratis, United States, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES: A COMPARATIVE LEGAL APPROACH 303, 330-31 (Michael G. Faure & Ton Hartlief eds., 2006) (explaining the need for the government to take primary responsibility for flood insurance since adverse selection proved too great a barrier for private insurance companies).
64. See generally Bernhard A. Koch & Stefan Strahwald, Compensation Schemes for Victims of Terrorism, in TERRORISM, TORT LAW AND INSURANCE: A COMPARATIVE SURVEY 260, 260-81 (Bernhard A. Koch ed., 2004) (explaining in brief U.S. and European state compensation schemes designed to protect victims of terrorist attacks) ;
65. Jeffrey Manns, Insuring Against Terror?, 112 YALE L.J. 2509, 2512-13 (2003) (commenting on the innovative approach of the Terrorism Risk Insurance Act, which puts the government in the role of reinsurer rather than direct insurer) ;
66. Erwann Michel-Kerjan & Burkhard Pedell, Terrorism Risk Coverage in the Post-9/11 Era: A Comparison of New Public-Private Partnerships in France, Germany and the U.S., 30 GENEVA PAPERS ON RISK & INS. 144, 146-57 (2005) (describing these different approaches to government involvement in terrorism insurance programs).
67. See Michel-Kerjan & Pedell, supra note 48, at 149-53 (describing the German Extremus AG program).
68. This company is called the Netherlands Reinsurance Company for Terrorism Damage (Nederlandse Herverzekeringsmaatschappij voor Terrorisme Schade).
69. See Michael Huber & Tola Amodu, United Kingdom, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES, supra note 47, at 261, 277-78 (explaining that the British government reinsures the pool of insurance firms and thus effectively acts as insurer of last resort).
70. For further information on the CCR, see CCR: Company Introduction, http:// www.ccr.fr/gb/gb-1024/ent_presentation.jsp (last visited May 1, 2007).. See also Michel Cannarsa, Fabien Lafay & Olivier Moréteau, France, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES, supra note 47, at 81, 101-03 (describing the function of the CCR).
71. Gron & Sykes, supra note 42, at 51.
72. See Roger van den Bergh & Michael Faure, Compulsory Insurance of Loss to Property Caused by Natural Disasters: Competition or Solidarity?, 29 WORLD COMPETITION 25, 33-35 (2006) (delineating the ways in which the French system runs afoul of competition law).
73. In the words of Christian Gollier, "[e]x-post, the social pressure for the public indemnification of the uninsured victims of a much publicized catastrophe will be strong. Solidarity kills market insurance." Gollier, supra note 36, at 25.
74. Howard Kunreuther, Robin Hogarth & Jacqueline Meszaros, Insurer Ambiguity and Market Failure, 7 J. RISK & UNCERTAINTY 71, 79-82 (1993) (citing surveys of underwriters, actuaries, and reinsurers that recommended premiums increase in the face of ambiguity).
75. Gollier, supra note 36, at 24.
76. See Paul Slovic, Howard Kunreuther & Gilbert F. White, Decision Processes, Rationality and Adjustment to Natural Hazards, in THE PERCEPTION OF RISK 1, 7 (Paul Slovic ed., 2000) (describing a misperception about flood insurance).
77. Kunreuther, supra note 36, at 175; see also Richard A. Epstein, Catastrophic Responses to Catastrophic Risks, 12 J. RISK & UNCERTAINTY 287, 293 (1996) (citing Kunreuther's research);
78. Richard Zeckhauser, The Economics of Catastrophes, 12 J. RISK & UNCERTAINTY 113, 115 (1996) (same).
79. See HOWARD KUNREUTHER ET AI., DISASTER INSURANCE PROTECTION: PUBLIC POLICY LESSONS 248 (1978) (noting that consumers are a key source of catastrophic market failure because they view insurance as a poor investment);
80. Paul J.H. Schoemaker & Howard C. Kunreuther, An Experimental Study of Insurance Decisions, 46 J. RISK & INS. 603, 612 (1979) (offering the possibility that people view insurance as an "investment aimed at maximizing claim payments in case the hazard occurs");
81. Paul Slovic et al., Preference for Insuring Against Probable Small Losses: Insurance Implications, in THE PERCEPTION OF RISK, supra note 58, at 51, 62-71 (noting that people are more willing to purchase insurance when they feel they cannot lose).
82. In some countries, insurance against natural hazards is available only to a limited extent, or not at all. This was the case in the Netherlands, where insurance for flooding and earthquake risks was for a long time excluded as a result of a cartel agreement between insurers who agreed not to cover the particular risks. As a result of intervention from the European competition authorities, these so-called "binding decisions" were abrogated. For details, see Michael G. Faure & Ton Hartlief, The Netherlands, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES, supra note 47, at 195, 203-06.
83. See Kunreuther, Doherty & Kleffner, supra note 45, at 60 (noting that Californians remained uninsured despite knowing that earthquake insurance existed).
84. For details regarding a voluntary insurance scheme and the human proclivity to opt out, see Rabin & Bratis, supra note 47, at 328-29 and Slovic, Kunreuther & White, supra note 58, at 14.
85. See, e.g., Kunreuther, supra note 36, at 173 (presenting statistics that only onefourth of households in flood-prone areas had flood insurance in 1995); cf. Zeckhauser, supra note 59, at 135 (noting similar underinsurance regarding earthquakes).
86. In Louisiana the percentage of homeowners with insurance ranged from 7.3% in Tangibahoa to 57.7% in St. Bernard's. In New Orleans only 40% had flood insurance. Howard Kunreuther, Has the Time Come for Comprehensive Natural Disaster Insurance?, in ON RISK AND DISASTER: LESSONS FROM HURRICANE KATRINA 175, 175 (Ronald Daniels, Donald F. Kettl & Howard Kunreuther eds., 2006).
87. In Germany, the flood is referred to as the "Jahrhundertflut."
88. See Ulrich Magnus, Germany, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES, supra note 47, at 119, 130 (noting that only 50% of households during this flood had flood insurance); Schwarze & Wagner, supra note 45, at 156-60 (explaining insurers' financial troubles in the wake of this flood).
89. See Farber, supra note 15, at 1609 (assuming such a normative preference while discussing the challenges of a compensation scheme).
90. Howard Kunreuther, The Case for Comprehensive Disaster Insurance, 11 J.L. & ECON. 133 (1968).
91. See Kunreuther, supra note 65, at 186-88 (proposing comprehensive disaster insurance in the wake of Hurricane Katrina) ; Howard Kunreuther & Mark Pauly, Rules Rather Than Discretion: Lessons From Hurricane Katrina, 33 J. RISK & UNCERTAINTY 101, 102-04 (2006) (advocating mandatory comprehensive disaster insurance instead of ex post relief).
92. For examples of European scholarship, see Michael Faure, Financial Compensation in Case of Catastrophes: A European Law and Economics Perspective, in TORT AND INSURANCE LAW YEARBOOKJ EUROPEAN TORT LAW 2004 at 2, 13-15 (Helmut Koziol & Barbara C. Steininger eds., 2005) and Schwarze & Wagner, supra note 45, at 154-168.
93. For a description of the French system, see Olivier Moréteau, Policing the Compensation of Victims of Catastrophes: Combining Solidarity and Self-Responsibility, in SHIFTS IN COMPENSATION BETWEEN PRIVATE AND PUBLIC SYSTEMS (Willem H. van Boom & Michael Faure eds., forthcoming 2007).
94. For details, see Cannarsa et al., supra note 52, at 85-89.
95. Some competition is of course still possible with respect to the basic housing policy to which the mandatory disaster coverage is added.
96. For an example of such criticisms, see Erwann Michel-Kerjan, Insurance Against Natural Disasters: Do the French Have the Answer? Strength and Limitations 7-14 (Ecole Politechnique, Cahier No. 2001-007, 2001).
97. See Slovic et al., supra note 60, at 71 (suggesting combining "low-probability hazards with higher probability threats in one insurance 'package'").
98. It would of course go too far to discuss all of these in detail within the scope of this Commentary. For a more detailed analysis, see Michael G. Faure, Financial Compensation for Victims of Catastrophes: A Law and Economics Perspective, L. & POL'Y (forthcoming 2007) (manuscript at 12-17, on file with author), Kunreuther & Pauly, supra note 70, at 101-16; Michel-Kerjan, supra note 75, at 6-9, and Schwarze & Wagner, supra note 45, at 165-66.
99. See Slovic et al., supra note 58, at 25-26 (describing the insurance premium as an estimate of risk); Slovic et al., supra note 60, at 62 (proposing to reimburse those who make no claims as a solution to the preference of insuring against high-probability, low-loss events).
100. See Anthony I. Ogus, Regulatory Paternalism: When Is It Justified?, in CORPORATE GOVERNANCE IN CONTEXT: CORPORATIONS, STATES, AND MARKETS IN EUROPE, JAPAN AND THE U.S. at 303, 303-20 (Klaus J. Hopt et al. eds., 2005) (analyzing the benefits and risks of paternalist regulation).
101. See Slovic et al., supra note 60, at 71 (noting the possibility that increased publicity may persuade the public that insurance is a matter of community well-being as opposed to a personal choice).
102. See Paul Slovic, Baruch Fischoff & Sarah Lichtenstein, Response Mode, Framing and Information-Processing Effects in Risk Assessment, in THE PERCEPTION OF RISK, supra note 58, at 154, 166 (noting various problems standing in the way of effective informational programs).
103. But see Schwarze & Wagner, supra note 45, at 165 (critiquing the French system's "dual approach" in which people must insure separately for "storm guarantee" and against natural hazards).
104. Isabelle Durant, Belgium, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES: A COMPARATIVE LEGAL APPROACH, supra note 47, at 37, 66-69 (describing the key provisions of theAct of 21 May 2003).
105. Philippe Colle, De wet van 17 September 2005 betreffende de verzekering van natuurrampen, 69 RECHTSKUNDIG WEEKBLAD 881, 881-85 (2006).
106. For more on this issue, see Van den Bergh & Faure, supra note 54, at 25-54.
107. See Kunreuther & Michel-Kerjan, supra note 5, at 1805-06.
108. Epstein, supra note 59, at 287-88.
109. Id. at 305; see also Gollier, supra note 36, at 25 (arguing that "if citizens believe that the state will compensate them for their damages, they will prefer not to insure the risk").
110. Kunreuther, supra note 36, at 177.
111. Kunreuther & Michel-Kerjan, supra note 5, at 1826. This point is also stressed by Priest, supra note 39, at 219.
112. See Slovic et al., supra note 58, at 25.
113. See Schwarze & Wagner, supra note 45, at 159-60 (explaining the zoning regions in Germany's coverage plan); CORNELIA R. KARGER, WAHRNEHMUNG UND BEWERTUNG VON "UMWELTRISIKEN": WAS KȮNNEN WIR AUS DER FORSCHUNG ZU NATURKATASTROPHEN LERNEN?, ARBEITEN ZUR RISIKO-KOMMUNIKATION (Forschungszentrum Jülich, Arbeiten zur Risikokommunikation Heft 57, 1996) (discussing the observation and valuation of environmental risks and analyzing the extent to which the experience with natural catastrophes can provide an example for risk differentiation in the case of environmental damage).
114. For a description of the changes in Belgium, see Durant, supra note 83, at 37-39.
115. See Alberto Monti & Filippo Andrea Chiaves, Italy, in FINANCIAL COMPENSATION FOR VICTIMS OF CATASTROPHES, supra note 47, at 145, 186-91.
116. See Schwarze & Wagner, supra note 45, at 162-63 (making such a proposal).
117. See Kunreuther & Michel-Kerjan, supra note 5, at 1844.
118. See Magnus, supra note 67, at 124 (criticizing the generous compensation for victims of flooding (up to 8.1 billion euros!) after the Elbe flooding in 2002). For a similar criticism, see Zeckhauser, supra note 59, at 114.
119. See Schwarze & Wagner, supra note 45, at 166-67 (discussing the advantages of insurance-based solutions over government disaster funds).