Environmental Pollution Liability Insurance Research Articles

The impact of environmental pollution liability insurance on firms’ Green innovations: evidence from China

ABSTRACT Green innovation (GI) is crucial in promoting environmental sustainability, especially in the long run. Environmental pollution liability insurance (EPLI) facilitates firms better dealing with pollution-related risks, encouraging firms to invest in GI. This paper studies the impact of firms’ EPLI coverage on GI using data from Chinese heavily polluting firms. Results show that EPLI promotes GI, both in terms of quantity and quality, and it has a persistent effect on innovations over the years. Further mechanisms study suggests that EPLI improves the cash flow conditions and reduces agency costs of the board, which explains the positive effect of EPLI on GI.

A multiagent collaborative development strategy for environmental pollution liability insurance based on an evolutionary game

AbstractTo improve the problem of environmental pollution liability insurance, this paper constructs an evolutionary game model based on the government, insurance companies, and polluting enterprises. The findings indicate that in an imperfect market, penalty and subsidy mechanisms boost insurance rates. Reinsurance facilitates insurer underwriting, prompting gradual government withdrawal. Effective pricing mechanisms by insurance companies enhance environmental liability insurance operations amid evolving market mechanisms, offering theoretical guidance for addressing challenges in implementing such insurance.

Environmental pollution liability insurance pilot policy and enterprise green transformation: evidence from Chinese listed corporates

In the context of dual-carbon, corporate green transformation, a significant measure of the green effect of Environmental Pollution Liability Insurance (EPLI), garners substantial attention in current research. By leveraging the 2008 EPLI pilot policy as an exogenous event, this paper employs a difference-in-difference model to scrutinize the influence of the EPLI pilot on the green transformation of listed companies. We find that: (1) The EPLI pilot actively promotes corporate green transformation. (2) The pilot policy’s impact on green transformation is mediated through regional green development and enterprise investment efficiency. (3) The pilot policy manifests asymmetric effects on green transformation, influenced by regional, industrial, and enterprise-specific pollution levels, as well as government environmental concerns. (4) The EPLI pilot policy engenders enduring financial implications and contributes to the governance of information. This study is beneficial to enrich the research on the EPLI system and green transformation of enterprises that provide policy suggestions for improving the green financial system and promoting the green transformation of enterprises.

Does environmental pollution liability insurance affect corporate green innovation? New evidence from China

The effect of the development of green finance (GF) on the green transformation of corporations has been a key research issue in recent years. This study is based on a list of companies insured under the environmental pollution liability insurance (EPI) announced by the Ministry of Ecology and Environment (formerly the Ministry of Environmental Protection) in 2014 and 2015. Considering A-share listed companies in China as research samples and using the DID model, we investigate the impact of EPI on corporate green innovation (CGI). The results show that EPL can significantly promote the green innovation level of insured corporations, mainly reflected in two aspects of green invention patents and green utility model patents; this positive effect is more obvious in non-state-owned, heavily polluting, and patent-intensive corporations. These results hold after the robustness test. The mechanism analysis reveals that EPL promotes corporate green innovation by alleviating corporate financing constraints. This study provides new evidence for the role of GF in promoting green innovation and transformation in China.

Exploring the Effect of Policies on Environmental Pollution Liability Insurance in China’s Highly Polluting Industries: Applying Ajzen’s Theory of Planned Behavior

ABSTRACT This paper investigates the effects of different types of government policies related to environmental pollution liability insurance (EPLI) and how these policies promote the demand for EPLI of polluting enterprises. Based on the theory of planned behavior (TPB), we establish a research framework to analyze the effects and mechanisms of the three different policies (mandatory, incentive, and monitoring policies). Our empirical results suggest that the mandatory and monitoring policies can effectively promote companies to buy insurance, but the incentive policies have no significant impact on the insurance demand overall. Furthermore, companies with more positive environmental attitudes are not sensitive to mandatory policies. Although the overall effect of incentive policies is not significant, they have a significant positive impact on the EPLI demand of non-state-owned companies. The monitoring policies prompt enterprises to purchase insurance by strengthening information disclosure and compliant production.

The impact of insurance on pollution emissions: Evidence from China's environmental pollution liability insurance

The disaster risks caused by environmental pollution can be effectively reduced by insurance, however, how insurance affects pollution emissions remains unexplored in existing literature. This study aims to investigate the impacts of Environmental Pollution Liability Insurance (EPLI) implemented in China on pollution emissions by adopting difference-in-differences approach. Using the data at the prefecture-city level from 2003 to 2015, we find that EPLI has a significant inhibitory effect on pollution emissions, and the effect is stronger with the increasing numbers of insured enterprises and insurance premiums. Further analysis exploring channels suggests that EPLI can strengthen public supervision by compensating the public for economic losses caused by pollution, and improve self-discipline by increasing economic punishment for enterprises pollution. Our findings provide a new rationale for environmental administrators to regulate industrial polluters.

Environmental pollution liability insurance and green innovation of enterprises: Incentive tools or self-interest means?

The existing theoretical research on environmental liability insurance mainly focuses on system construction, development status and other aspects, and mainly consists of normative research, with relatively little empirical research. This paper uses empirical research methods to explore the impact of environmental liability insurance on the green innovation of enterprises and examines the driving role of environmental liability insurance in green innovation from the perspective of green governance. This paper, based on the list of enterprises purchasing environmental pollution liability insurance (EPLI) as published by the Ministry of Ecology and Environment, explores the impact of EPLI on the green innovation of enterprises. It is found that purchasing EPLI can significantly improve the green innovation of enterprises. The effect path test shows that EPLI can promote the green innovation of enterprises by relaxing financing constraints and reducing agency costs. The heterogeneity scenario test shows that compared with non-state-owned enterprises, non-heavily polluting enterprises, and enterprises in regions with a lower intensity of environmental regulation, EPLI plays a stronger role in the promotion of green innovation of state-owned enterprises, heavily polluting enterprises and enterprises in regions with a higher intensity of environmental regulation. In addition, it is found that the promotion effect of EPLI on green innovation is mainly reflected in the significant improvement of high-quality green innovation and the optimization of the structure of the green patent output. This paper affirms the positive role of EPLI on the green operations of enterprises and provides empirical evidence that green insurance serves the development of the green innovation of enterprises.

Environmental Pollution Liability Insurance Pricing and the Solvency of Insurance Companies in China: Based on the Black-Scholes Model.

Environmental pollution liability insurance is becoming increasingly important for China to achieve its emission reduction targets. Insurance pricing is a crucial factor restricting the market share of environment pollution liability insurance, from the perspective of the Black-Scholes pricing model, which in turn has influenced the solvency of insurance companies in China. Firstly, this study analyzes the problems existing in compulsory liability insurance for environmental pollution in China. It proceeds with analyzing the price of compulsory environmental pollution liability insurance using the Black-Scholes pricing model, and derives a high premium insurance rate of 2.44%. Moreover, it performs a multivariate regression analysis using the asset and liability data, taken from the annual report, to identify three key factors affecting the solvency adequacy ratio, namely, capital debt ratio, reflecting the company asset structure; net interest rate on assets, reflecting the asset scale with actual solvency; and claim ratio, reflecting the business quality. Based on the results of regression analysis and robustness test for the China Insurance Clauses (CIC) company, People's Insurance Company of China (PICC), and Asia-Pacific Property & Casualty Insurance (API) company, it is shown that the effect of total asset, total debt, capital debt ratio, claim ratio, and net interest rate on assets on the solvency adequacy ratio is significant, with respect to the size of the coefficients. Based on the Black-Scholes pricing model found in the previous cycle of liability insurance, and keeping in view the existing problems of environmental pollution liability insurance expenditure, this paper presents suggestions that are conducive to improving the solvency of insurance companies in China.

Does environmental pollution liability insurance promote environmental performance? Firm-level evidence from quasi-natural experiment in China

Taking China's environmental pollution liability insurance (EPLI) in 2008 as a quasi-natural experiment and using extensive panel data from the Chinese Industrial Enterprise Pollution Database (1998–2014) and Chinese Industrial Enterprise Database (1998–2013), this paper identifies the implementation effects of EPLI on emission reduction by employing the method of time-varying difference-in-differences. Results demonstrate that market-based environmental regulation has significantly promoted all types of industrial firms' emission reduction, except collective enterprises. EPLI, as a market-based environmental regulation, owns more flexible mechanisms to stimulate firms to reduce emissions, including reducing the usage of coal and oil and increasing the quantity of emission treatment facilities and investment. This paper provides empirical evidence to support the usage of EPLI in improving environmental performance, which not only comprehensively evaluates China's market-based tool but also provides treasures experience for the environmental management of developing countries on a firm level.

Market supervision, innovation offsets and energy efficiency: Evidence from environmental pollution liability insurance in China

With the sustained expansion of energy demand, the energy crisis gradually become the core concern of society. Improving energy efficiency (EE) is crucial for saving energy and reducing emissions while ensuring economic growth. Environmental regulation is an effective tool to improve EE and environmental quality. This study introduces market supervision to further explore the impact of environmental regulation on EE. Taking environmental pollution liability insurance (EPLI) implemented in China as a quasi-natural experiment, we construct a time-varying difference-in-differences (DID) model to investigate the impact of EPLI on EE and conduct a series of robustness tests. Results indicate that the implementation of EPLI significantly improves EE, and the results of staggered DID are consistent with our findings. Further, heterogeneity analysis shows that the effect of market supervision will be affected by marketization degree and enterprise characteristics. Mechanism analyses indicate that increasing investment is an effective way for market supervision to realize “innovation offsets”. The evidence of the new relationship between market supervision and EE in this paper will provide a new perspective to formulate policies for policymakers.

Environmental Pollution Liability Insurance and Corporate Performance: Evidence from China in the Perspective of Green Development.

Environmental pollution is an inevitable primary responsibility in the production and management of enterprises, and it is the most severe challenge to achieving green production and sustainable development. Environmental pollution liability insurance (EPLI) can transfer corporate pollution liability to insurance companies, which affects corporate performance to a certain extent. However, the influencing factors of enterprise performance are complex, and EPLI also involves multiple subjects, so the impact of EPLI on enterprise performance is also complex. At first, this paper analyzes the possible relationship between EPLI and corporate performance based on the existing literature; subsequently, based on the list of EPLI-insured companies in 2014 and 2015 published by China’s environmental protection department as a sample, this paper uses a fixed-effects model to conduct an empirical analysis, and the mediating role of corporate social responsibility (CSR) was then examined; finally, heterogeneity analysis of the initial conclusions was conducted. The following conclusions are drawn: firstly, there is a significant negative correlation between EPLI and corporate performance. Secondly, CSR played a mediating role in the effect of EPLI on corporate performance; that is, EPLI inhibited the rise of corporate performance by affecting CSR. Thirdly, the impact of EPLI on corporate performance is heterogeneous in terms of equity nature, corporate pollution level and marketization degree. The results of this paper enrich the economic impact theory of EPLI and have specific practical value for enterprise management and policymakers in the background of the green economy.

Environmental Pollution Liability Insurance of Health Risk and Corporate Environmental Performance: Evidence From China.

Environmental pollution liability insurance (EPLI) is a type of insurance purchased by an enterprise to compensate the loss of the victims in the event of an environmental pollution incident. Although EPLI can realize the post-treatment of environmental pollution to a certain extent, there is still less understanding of whether EPLI can improve the environmental performance of enterprises. This study takes A-share listed companies in heavily polluting industries as the research object, determines the treatment group samples according to the Insurance coverage list published by the Ministry of Environmental Protection in 2014 and 2015, and then constructs the empirical test model. In order to ensure that there is no sample selection bias, the PSM method is used to preprocess the samples in this study to ensure the robustness of the conclusions. The empirical tests show that EPLI can significantly improve corporate environmental performance. Further analysis showed that higher public visibility is conducive to the positive environmental effects of EPLI. Compared with state-owned enterprises, non-state-owned enterprises have more significant implementation effects after introducing EPLI. On further examination, the result indicates that environmental pollution liability insurance can improve environmental performance by alleviating corporate financing constraints. The findings of this paper enrich the theory of the economic impact of environmental pollution liability insurance, which has some meaningful theoretical guidance for enterprises and policy makers.

Japan’s Environmental Governance Experience and Its Implications

Japan created domestic economic prosperity at the cost of environmental damage after World War II, and then achieved remarkable results in controlling environmental pollution in a short time. The article systematically analyzes the beneficial experience of Japan's environmental governance from the aspects of environmental governance laws, policies, cultural education, and energy conservation. Japan has played an active role in governance through measures such as strengthening legislation and policy innovation to provide comprehensive and standardized legal policy guarantees, popularizing environmental education to improve public environmental awareness, and implementing environmental pollution liability insurance to reduce economic losses caused by environmental problems, which has a certain reference value for China's environmental protection work.

System dynamics simulation for park-wide environmental pollution liability insurance

Chemical industrial parks have led to the concentration of major hazards which can potentially result in a domino effect of accident losses. Environmental risks need to be managed in a cost-effective way for chemical industrial parks. This paper focuses on the applicability of the environmental pollution liability insurance (EPLI) in park-wide risk management. The interactions among stakeholders (i.e., chemical companies, insurance companies, and the local government) are investigated using system dynamics (SD). The SD model for EPLI considers the interactions between output value, risk level, related government policies, and insurance products. Three different insurance scenarios are developed, i.e., single company, multiple coalitions, and grand coalition. SD is used to comprehensively map the causality relationships among stakeholders and simulate trends over time. A practical case study is used to illustrate the model. Results show that the implementation of coalition EPLI helps reduce management difficulties and result in lower premiums in the long run when implemented. Furthermore, the most beneficial strategy is insuring the entire coalition of industries.

Effects and Choices of Environmental Pollution Liability Insurance in Provinces of China

China began a pilot application for environmental pollution liability insurance in 2008. Although implementation situations vary substantially in different regions in China, it is appropriate to test how much contribution pollution insurance may make to environmental risk mitigation and other factors. Based on an analysis of pollutant emissions and investment completed in the treatment of industrial pollution, we find that pollution liability insurance, both compulsory and voluntary, does not work as expected in reducing environmental pollution. The value of this insurance mainly lies on the concern of the government for victims in environmental disasters. Considering the high administrative costs, it is not proper to push compulsory insurance across the country indiscriminately. Thus, this paper further classifies all 31 provinces in mainland China according to their economy and pollution characteristics and establishes guidelines for adopting pollution insurance for each province. The result shows that compulsory insurance is unnecessary for most provinces, while voluntary insurance can match their needs better.

Environmental pollution liability insurance to promote environmental risk management in chemical industrial parks

Chemical industrial parks have led to the concentration of major hazards which can potentially result in a domino effect of accident losses. Environmental risks need to be managed in a cost-effective way for chemical industrial parks. This paper focuses on the applicability of the environmental pollution liability insurance (EPLI) in park-wide risk management. The interactions among stakeholders (i.e., chemical companies, insurance companies, and the local government) are investigated using system dynamics (SD). The SD model for EPLI considers the interactions between output value, risk level, related government policies, and insurance products. Three different insurance scenarios are developed, i.e., single company, multiple coalitions, and grand coalition. SD is used to comprehensively map the causality relationships among stakeholders and simulate trends over time. A practical case study is used to illustrate the model. Results show that the implementation of coalition EPLI helps reduce management difficulties and result in lower premiums in the long run when implemented. Furthermore, the most beneficial strategy is insuring the entire coalition of industries.

A game theory approach for corporate environmental risk mitigation

Manufacturing companies face many environmental risk problems in their production process. Demands of safe production processes and strict environmental regulations drive companies to balance capital planning problems with minimization of risk constraints. Environmental pollution liability insurance (EPLI) could be a useful tool to mitigate these risks. Manufacturing companies generally prefer to spend less money on investments for risk minimization; on the other hand, insurance providers prefer to provide more alternatives to satisfy the needs of manufacturing companies and obtain as much benefit as possible. The interaction between a manufacturing company and a company providing EPLI may be modeled as a game between two players. This paper proposes a game theory approach for corporate environmental risk mitigation via EPLI. Parameters of the game theoretic model can be calibrated to achieve a desirable equilibrium. A pharmaceutical company case study is used to demonstrate the application of the proposed approach.

Insurance as a market mechanism in managing regional environmental and safety risks

A new insurance product—safety and environmental pollution liability insurance (SEPLI) —has been developed as an important supplement to the current safety and environmental risk prevention and control system. In comparison with other common insurances, SEPLI extends the function of insurance from the simple compensation function to the “process management+compensation” function. In this work, we propose a general model to describe the operation of SEPLI. The entire process consists of five stakeholders: advisory team, government, enterprises, insurance companies, and third-party service agencies. All the aforementioned stakeholders are divided into three levels according to the proposed SEPLI model. An advisory team lies in the outermost layer and serves a directive role. The authority, insurance companies, and enterprises are located at the middle level and constitute a stable triangle. The third-party service agencies sit in the innermost layer because they are critical for making the entire system operate efficiently. Based on the general model, six specific SEPLI models are introduced. A series of indicators are also proposed to evaluate the operation performance of SEPLI based on the request by related stakeholders.

Securitization product design for China's environmental pollution liability insurance.

The environmental catastrophic accidents in China over the last three decades have triggered implementation of myriad policies by the government to help abate environmental pollution in the country. Consequently, research into environmental pollution liability insurance and how that can stimulate economic growth and the development of financial market in China is worthwhile. This study attempts to design a financial derivative for China's environmental pollution liability insurance to offer strong financial support for significant compensation towards potential catastrophic environmental loss exposures, especially losses from the chemical industry. Assuming the risk-free interest rate is 4%, the market portfolio expected return is 12%; the financial asset beta coefficient is 0.5, by using the capital asset pricing model (CAPM) and cash flow analysis; the principal risk bond yields 9.4%, single-period and two-period prices are 103.85 and 111.58, respectively; the principal partial-risk bond yields 10.09%, single-period and two-period prices are 103.85 and 111.58, respectively; and the principal risk-free bond yields 8.94%, single-period and two-period prices are 107.99 and 115.83, respectively. This loss exposure transfer framework transfers the catastrophic risks of environmental pollution from the traditional insurance and reinsurance markets to the capital market. This strengthens the underwriting capacity of environmental pollution liability insurance companies, mitigates the compensation risks of insurers and reinsurers, and provides a new channel to transfer the risks of environmental pollution.

International Experience of Environmental Pollution Liability Insurance

The pilot work of environmental pollution liability insurance in China restarted in 2007, and it was less than ten years until now. The pilot provinces and cities did a lot of useful attempts, but it was still in a Best Game No One Played embarrassing situation in many places. Based on these above, this paper reviewed the development course of representative national environmental pollution liability insurance like the United States, France and Germany, and hope that it can provide some helpful reference for the improvement of the insurance of China.