CONICET | Buscador de Institutos y Recursos Humanos

This paper presents a game model about environmental insurance. It involves strategic interaction between three players: Government, Insurance Company and Potentially Polluting Entity. Government has to establish legal regulation for environmental insurance, as a Security Insurance or a Liability Insurance. In turn, Insurance Company has to decide whether it will offer the insurance or not. Finally, Potentially Polluting Entity must choice between hiring the environmental insurance contract or not; and whether to make a high or low effort to prevent environmental damage. Moreover, Nature takes part in the game, determining the probability distribution of the random event that produces environmental damage. The solution found to the game is not encouraging with regard to the offered contract because insurance ends up not being hired. However, a positive outlook let us suggest that agent makes a high effort to prevent environmental damage and to cut down the destruction of natural resources due to human activities, which is one of the most important objectives of the regulation.