Climate change and insurance: A critical appraisal

Tol, Richard S J (1998) Climate change and insurance: A critical appraisal. Energy Policy, 26 (3). pp. 257-262. ISSN 0301-4215

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Several issues relating to insurance and the damage costs of climate change are discussed. It is argued that the option of insuring climate change is severely limited because the associated damages are hardly quantifiable and little diversifiable; in addition, binding contracts are a problem on long time scales and in an international context. Hedging, consumption smoothing over time, precautionary investments and liability are not to be presented under the heading of insurance, not only because this unnecessarily and confusingly expands the traditional definition of insurance, but also because this could create a false sense of security. The impact of climate change on the profitability of the commercial insurance sector is not likely to be severe, as the insurance companies are capable of shifting changed risks to the insured, provided that they are properly and timely informed on the consequences of climate change.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
H Social Sciences > HG Finance > HG8011 Insurance
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Depositing User: Richard Tol
Date Deposited: 23 Apr 2012 09:11
Last Modified: 23 Apr 2012 09:11
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