Abstract
Can climate change be insured? This question concerns experts and insurance managers since insurance was branded a prime tool to flexibly and productively deal with the effects of climate change (e.g., Kunreuther and Linneroth-Bayer 2003). Contrary to supporting advocates, social science and economic literature emphasizes rather the constraints to insuring natural hazards and problematizes the insurability of an ill-defined bundle of climate related hazards in general and the applicability of a formalized risk concept to climate change in particular.
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Notes
- 1.
The management of risk through insurance is an essential factor of trading since the fourteenth century (Luhmann 1993: p. 9). Only since the eighteenth century, insurance has been successfully introduced to deal with problems of health, family safety and property protection (Clark 1999). In the nineteenth century the roots of the modern social welfare state expanded the insurance idea to the collective system protecting the weak (Knights and Vurdubakis 1993). Only currently, insurance is perceived as a generic tool to manage individuals and collective risk (Baker and Simon 2002; Huber 2002).
- 2.
For example, in the 1990s the maximum impact of natural hazards such as floods, earthquakes or storms were estimated to be below € 680 million (Kunreuther 1997, p. 7). In 1992, already Hurricane Andrew caused insured costs € 10–€13.5 billion. However, it was estimated that had the storm taken another route, costs would have raised up to € 34–€ 55 billion (Klein and Kleindorfer 1999, p. 6). The summer floods of 2007 in the UK cost insurance firms € 5 billon, the 2002 flood in Germany accumulated to insured costs € 10 billion. For all cases it has to be noted that insured costs cover only about half of the caused damage.
- 3.
The upper bound marks the penetration in the group of mortgage takers; the lower bound reflects that coverage is only obligatory for bank customers. Hence, a growing group of property owners without mortgage is no longer obliged to purchase flood insurance.
- 4.
Recently, this decision has been overruled by the European Union’s decision to allow for market competition in the field of financial services, hence also insurance (Faure and Harlief 2006b).
- 5.
Low probability/high impact risks are mainly dealt with by politics (or not at all), while high probability/modest impact events are interpreted as a task for insurance.
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Huber, M. (2011). Insuring Climate Change – Managing Political and Economic Uncertainties in Flood Management. In: Gramelsberger, G., Feichter, J. (eds) Climate Change and Policy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17700-2_6
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