Private Arrangements to Cover Large-scale Liabilities Caused by Nuclear and Other Industrial Catastrophes

Marcus Radetzki and Marian Radetzki
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Marcus Radetzki: Department of Law, Stockholm University,
Marian Radetzki: Department of Economics, Lulea University of Technology, and with SNS Energy, Stockholm

The Geneva Papers on Risk and Insurance - Issues and Practice, 2000, vol. 25, issue 2, 180-195

Abstract: Nuclear and other industrial activities create rare likelihoods for very large catastrophes. Available insurance, intra-industry pooling of risk and the net worth of those who cause the risk, provide an inadequate coverage for compensation of third-party damage. In OECD countries, the top layer of damage compensation after such catastrophes is regularly transferred, explicitly or implicitly, to governments. This constitutes a subsidy of the risk-creating industries. For a variety of reasons, traditional insurers are unwilling to assume full liability for the potentially colossal damage of industrial catastrophes. Such risks could be offloaded to the immensely larger capital market through the issue of catastrophe bonds. This would obviate the need for public subsidy, and provide a means for market pricing of the risks, but considerable needs for public intervention would nevertheless remain. The Geneva Papers on Risk and Insurance (2000) 25, 180–195. doi:10.1111/1468-0440.00058

Date: 2000
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