Environmental Risk Management in Insurance Sector in Latvia

Abstract

The objective of this article is to explore climatic environmental risks in the context of the growing global impact, by characterizing the administrative form of risk management, which is the most appropriate for Latvia’s insurance sector.
Fundamental environmental risks are subdivided into natural risks, such as earthquakes, storms and floods; public exposure risks, such as nuclear power, climate change (pollution: air, water, earth) and economic crisis risks. Impact of particular risks is inherent in one risk-specific unit (object) or in a small number of risk-specific units (objects). Particular risks are subdivided into natural risks, such as wind, hail, drought and downpour, and third-party effect risks.
Global experience demonstrates the use of new forms of insurance, by insuring fundamental environmental risks, such as captive insurance companies, financial services futures and insurance schemes.
The administrative form of combined insurance – the insurance scheme – is the optimum choice for management of fundamental and particular environmental risks from both theoretical and practical point of view in Latvia’s insurance sector. Communication among the members of the insurance scheme is formed within the analysed scheme.