Insurance Market for Global Warming Heats Up: Old Products and New Policies Respond to Climate Change Risks

Abstract

Climate change, characterized by higher surface and water temperatures, will likely lead to more frequent and severe storms, floods, rising sea levels, wildfires, and loss of a variety of species. The monetary loss attributable to these events could be enormous, resulting in a variety of first-party insurance claims and thirdparty lawsuits. The availability of insurance coverage to pay these claims will depend on the nature of weather-related losses and the particular policies in force. Insurers have also begun to develop products that pay to rebuild to "greener" standards after fortuitous losses, encourage lower carbon emissions, and provide incentives for the implementation of sustainable business and personal practices.