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

Abstract 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.