Transcript Climate Change Losses and Liability: Insurance in

Climate Change Losses and Liability:
Insurance in International Pollution Regimes
M.J.Mace
Climate Change and Energy Programme
FIELD
www.field.org.uk
Insuring the Uninsurable
Climate Change and Insurance
Munich, Germany
May 10, 2004
AOSIS International
Insurance Pool
Collective loss sharing - fund to compensate
victims of sea-level rise

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Mandatory contributions from industrialized countries
based on GNP and CO2 emissions
Trigger for claims:
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rate and absolute level of global mean SLR reaches
previously agreed figures;
relative mean SLR of insured area in vulnerable country
reaches agreed level
Trigger levels and insured values subject to
negotiation with Authority
Claims for retreat and accommodation
measures
Oil Spill and Nuclear Regimes
layers of coverage
EU Cope Fund
(EU cargo
interests)
Joint State Funds
(Int’l solidarity
pool)
IOPC Fund
Installation
State
(int’l cargo interests)
(public funds top-up)
Operator Ins.
Operator Ins.
(tanker owner P & I Clubs)
(installation operator
- national ins pools)
Oil Spill Regime:
CLC and IOPC Conventions
c
EU Cope Fund
(EU cargo
interests)
IOPC Fund
(int’l cargo interests)
c
Operator Ins.
(tanker owner P & I Clubs)
2nd Supplemental Layer
up to US$203 million
1st Supplemental
layer of cover
nn
up to US$175 million
Mandatory insurance
LL based on capacity of oil tanker
Coverage/strict liability
up to US$82 million
Who bears the major costs of oil spill damage?
1,000 million Euro
EU Beneficiaries
Additional levy imposed on entities w/i
EU receiving oil - contingent fund
EU Fund
$203 million
Fund Protocol
$175 million
IOPC Fund
(Supplemental)
$82 million
Convention on
Civil Liability
Beneficiaries of shipments
Per ton levy imposed on Companies
receiving oil (Consumption/Demand )
(Protocol increases ceiling for claims )
CO2 ANALOGY: HEAVY INDUSTRY,
UTILITY COMPANIES
Tanker owners, shipping interests
(primary financial interest from shipment;
control risk reduction) (Production/Supply)
CO2 ANALOGY: OIL PRODUCERS
Oil Spill Regime
coverage and purpose
Covers 91% of world’s shipping oil tonnage
Governments redistribute and manage risk

Parties’ domestic legislation imposes per ton levy on oil
receivers of a certain size

responsibility for costs of spill cleanup shifted from
government and private citizens, more directly to those
engaged in or benefiting from risky behavior

addresses situations where no individual entity is clearly
responsible for a spill
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recognizes complexity of oil shipping industry (flagged
vessels, diverse nationalities of crews, owners, shared
responsibilities, old vessels, difficult jurisdictional
issues, proof problems)
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Doesn’t matter who is at fault, recourse is provided to those
injured, through a fund/pool constituted from those
contributing to risk

Owners/operators avoid unlimited liability; accept mandatory
insurance coverage, in exchange for a known limit of liability,
graduated based on tonnage

With a known limit of liability, insurance can be obtained,
because insurance industry can assess risk exposure and
price coverage

Public and government exchange potential claim for recovery
of clean up costs against a potentially responsible party
(which may entail proof problems, bankrupt entities) empty
pocket problems, for the ability to recover clean up costs
directly from fund constituted under the IOPC.
Nuclear Regime
governments retain substantial responsibility
c
Joint State Funds
(Int’l solidarity
pool)
Installation State
(Public funds)
c
Operator Ins.
(operators of nuclear
installations)
2nd Supplemental Layer
up to total of 300 million SDRs,
(50% GNP, 50% State’s
thermal power ratio
1st Supplemental
nn layer of cover
up to a total of 175 million SDR;
state pays if operator cannot
Minimum operator liability,
of 5million SDR
to be guaranteed by financial
security -States may allow higher
Other Convention Processes
use insurance mechanisms to manage risk
Basel Protocol on Liability and Compensation
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Transboundary transport of hazardous substances
Handlers required to obtain insurance, bonds or other financial guarantees
with exposure tied to amount shipped
CRTD Convention
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Carriers of dangerous goods by road, rail, vessel
Required to obtain insurance or financial security to cover damage during
transport
amount tied to type of carrier, type of injury potentially suffered
Watercourses and Industrial Accidents Protocol
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Impacts of industrial facilities on international watercourses
Financial security required at a fixed ratio relative to liability limits
HNS Convention

Similar to CLC and Fund Convention for oil spill regime
End
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