Hedging Strategies and the Financing of the 1992 International Oil Pollution Compensation Fund
AbstractThe maritime oil transport is regulated by the 1992 Civil Liability Convention for Oil Damage and the 1992 Oil Pollution Compensation Fund. In this compensation regime, contributions of oil firms are based on the aggregate risk of the Fund and are assessed each time an oil spill is registered. In this paper, we present the main characteristics of such a compensation regime and we explain why oil firms would benefit from a reorga- nization of the financing of the Fund by introducing appropriate hedging mechanisms. As standard insurance is shown to be too limited for the coverage of oil spills, we high- light the arguments that justify the introduction of financial hedging instruments in the management of the compensation system related to oil spills.
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Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2005-12.
Date of creation: 2005
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Oil spill; IOPC Fund; risk management; insurance; financial hedging.;
Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-ENE-2006-01-01 (Energy Economics)
- NEP-FIN-2006-01-01 (Finance)
- NEP-FMK-2006-01-01 (Financial Markets)
- NEP-IAS-2006-01-01 (Insurance Economics)
- NEP-LAW-2006-01-01 (Law & Economics)
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