Mitigation of Long-Term Risks and the Role of Insurance: A Behavioural Law and Economics Perspective

Qihao He*, Michael Faure

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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In a world of rising long-term risks and their ensuing syndromes, the mitigation and financing of long-term risks are therefore arguably some of the most critical issues facing society. However, long-term thinking involving future generations draws limited attention in current political and social systems. Private insurance has received increased attention due to its expert role in risk management and its risk transfer mechanisms, and it has played an important role in dealing with some types of long-term risk, such as floods and earthquakes. Increasingly, insurance also contributes to disaster mitigation through regulating the conduct of policyholders by creating incentives for policyholders to counter short-termism and invest in reduction measures regarding long-term risks. In addition, it has been shown that supply-side problems and behavioural anomalies make it difficult to insure against long-term risks. Innovative long-term insurance solutions and a combination of public and private partnerships are proposed to overcome these restrictions.

Original languageEnglish
Pages (from-to)779-792
Number of pages14
JournalEuropean Journal of Risk Regulation
Issue number4
Early online date17 Apr 2023
Publication statusPublished - 17 Dec 2023

Bibliographical note

Financial support
Qihao He acknowledges the financial support of the China Ministry of Education Research Program on Climate Change and Insurance (No. 18YJC820024).

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