Climate Change, Compensation and Unpredictable or Uninsurable Loss: A Possible Path Forward Using Compensation Funds

Abstract

Abstract Climate change has created existential challenges for current models of natural hazard insurance, and it may be difficult going forward for these models to consistently, fairly and coherently manage the compensation challenges associated with climate change impacts in Europe. This paper analyses the application of a comprehensive no-fault compensation fund framework to the problem of presently uninsured and technically uninsurable losses that are currently inadequately covered by other compensation mechanisms, and for which compensation may be difficult to recover using tort law mechanisms. The proposed structure includes consideration of the purpose and form of the fund, eligibility and categories of loss covered, quantum of compensation, and funding sources. There is also a preliminary consideration of the impact of such a fund on questions of liability. The proposed model illustrates potential ways for a compensation fund to support and complement existing compensation structures such as insurance and civil liability, and provide the necessary stabilisation in European society. Further legal research in this area will require qualitative and quantitative empirical data on how existing compensation frameworks (including innovative insurance instruments like parametric insurance) have so far positively and negatively impacted the ability of victims of climate change to prepare for and recover from loss incidents, in comparison with tort law and existing insurance.