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Financial Compensation in Case of Catastrophes: A European Law and Economics Perspective


  • Michael Faure

    (METRO Institute, Maastricht University)


This paper deals with the way in which various legal instruments provide compensation to victims of catastrophes in Europe. The traditional law and economics of insurance literature with respect o government relief and insurance solutions towards financial compensation is used to analyse various (highly diverging) solutions in several European countries. First the importance of liability (insurance) is discussed in the case a liable injurer can be indentified; the the possibilities of first party insurance are examined whereby various regulatory solutions (more particularly the French model of providing mandatory coverage for catastrophes) is critically discussed. The (first party) insurance solution is compared with public intervention whereby a distintion is made between ad hoc government relief on an ex post basis versus structural compensation funds. The various solutions applied and discussed in many European countries are crtitically analysed with respect to on the one hand their ability to provide adequate compensation at low costs and at the other hand their effects on incentives for prevention and for developing private (insurance) solutions.

Suggested Citation

  • Michael Faure, 2004. "Financial Compensation in Case of Catastrophes: A European Law and Economics Perspective," CAE Working Papers 16, Aix-Marseille Université, CERGAM.
  • Handle: RePEc:cgm:wpaper:16

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    More about this item


    catastrophes; first party insurance; compulsory insurance; flood insurance; compensation funds; government relief;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other


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