Compensating Catastrophe Victims. A Comparative Law and Economics Approach

The scope and frequency of catastrophes, natural or man-made, are mounting. In 2008, more than 240,500 fatalities were counted, due to 311 natural catastrophes and man-made disasters. These numbers are unprecedented. It is to be expected that a mounting number of victims will look for financial compensation in the aftermath of future catastrophes.

As the author of this ground-breaking book points out, there are as many sets of compensation mechanisms as there are countries. In a prodigious move to remedy this situation, she examines whether it is possible to find a combination of compensation mechanisms (i.e., a compensation model) that provides the most comprehensive and efficient financial solution for the victims of a natural catastrophe, a large-scale terrorist attack, and/or a man-made disaster – and, if so, what such a program would look like. In the process she deals exhaustively with such elements as the following:

• the type of victims that disasters can cause;

• safety regulation versus liability law;

• insurability of catastrophes;

• compensation funds;

• capital market instruments;

• types of government intervention;

• defining terrorism for the purpose of compensation; and

• preventive incentives as an element of efficient compensation.

Because economic efficiency is an unavoidable factor in the compensation of catastrophe victims, the author relies primarily on a law and economics perspective in order to find an efficient and comprehensive model that is workable in practice and that takes into account the legal and cultural situation in the various countries. Once she has developed this model, she compares it with actual programs in Belgium, France, the Netherlands, and the United States of America – countries carefully chosen to represent a reasonably full variety of possible solutions. This comparison of real world solutions allows her to explain why each is inefficient and to define real and necessary conditions for policy change.

This book shows that amelioration of the current compensation solutions for disaster victims is indeed a possibility. In a heated yet often poorly informed debate, it offers clarity and insights regarding the financial compensation for victims of catastrophes which, in addition to raising academic interest, are certain to help build a framework for future policymakers and lawmakers faced with shaping compensation programs for catastrophe victims.