Ecological Risk Assessment and Economic Valuation of Ecological Damage As Tools To Support Insurers on the Assessment of Pollution Risks. Ana Salgueiro, Paula Antunes, and Rui Santos, ECOMAN, Ecological Economics and Management Center, Department of Environmental Sciences and Engineering, Faculty of Sciences and Technology, New University of Lisbon, Quinta da Torre, 2825 Monte de Caparica, Portugal, telephone +351-1-2954464 (ext 0159), fax +351-1-2948554, e-mail mop71179@mail.telepac.pt or salgueiros@mail.telepac.pt
Liability for environmental damages is likely to be, in the short term, within the most serious risks for the financial situation of business. Pollution insurance systems are a tool with a strong potential in environmental management. However the development and implementation of such systems can be troublesome, mainly due to difficulties in identifying and quantifying activity risks, and with the monetary valuation of ecological damages.
We propose a framework linking economic valuation methods to ecological risk assessment processes, intended to develop a guide to help insurers on the assessment of pollution risks resulting from accidental situations.
The framework consists of a flexible approach with different tiers of complexity according with the degree of risk. The predicting potential of the framework associated to an uncertainty analysis represents a significant contribution to insurance companies that can early know the level of risks of the candidate activities and decide to decline or underwrite the risks.
Additionally the estimation of the monetary value of the ecological damage through the use of Economic Valuation methods improves the insurance companies confidence in establishing premium values to the insured party, compensation amounts to the victims and recovery costs. Several methods have potential of application in such a system as well as Benefit Transfers techniques. The strengths and weaknesses of the different methods as well as their optimum range of application will be discussed, considering the specificity of each case in relation to criteria like ecosystem sensitivity, complexity of the activity under study, available time and financial constraints. A standard procedure is being developed to objectively guide the insurer in the strategy to take.
The framework will be illustrated using several scenarios as case study.
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