Financial Compensation for Victims of Catastrophes: A Law and Economics Perspective

29 Pages Posted: 18 Jun 2007

See all articles by Michael G. Faure

Michael G. Faure

University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law

Abstract

This article examines the various approaches legislators may use to compensate victims of catastrophes. Traditional law and economics of insurance literature, with respect to government relief and insurance solutions towards financial compensation, is used to analyze (highly diverging) approaches in Europe and the United States. First, the importance of liability (insurance) is discussed in cases where a liable injurer can be identified; second, the possibilities of first-party insurance are examined, whereby various regulatory solutions (particularly the French model of providing mandatory coverage for catastrophes) is critically discussed. The (first-party) insurance solution is compared with public intervention, and a distinction is made between ad hoc government relief on an ex-post basis and structural compensation funds. The solutions applied and discussed in many countries are critically analyzed for their ability to provide adequate compensation at low costs and their effects on incentives for prevention and for developing private (insurance) solutions.

Suggested Citation

Faure, Michael G., Financial Compensation for Victims of Catastrophes: A Law and Economics Perspective. Law & Policy, Vol. 29, No. 3, pp. 339-367, July 2007. Available at SSRN: https://ssrn.com/abstract=992347 or http://dx.doi.org/10.1111/j.1467-9930.2007.00258.x

Michael G. Faure (Contact Author)

University of Maastricht - Faculty of Law, Metro ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands
+31 - 43 - 388 30 60 (Phone)
+31 - 43 - 325 90 91 (Fax)

HOME PAGE: http://www.michaelfaure.be

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

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