Applying Life Insurance Principles to Coastal Property Insurance to Incentivize Adaptation to Climate Change

36 Pages Posted: 3 Jun 2016

See all articles by Edward P. Richards

Edward P. Richards

Louisiana State University, Baton Rouge - Paul M. Hebert Law Center

Date Written: June 1, 2016

Abstract

Current levels of greenhouse gases will result in significant sea level rise in the future, irrespective of the success of any future mitigation efforts. Paleoclimate and geologic data from past periods of rising sea level show that low lying areas, especially river deltas which are home to half a billion people, will be inundated. The best way to represent this risk through insurance is to apply the human-life insurance model to coastal property insurance. Human-life insurance is based on the assumption that every insured will die. Because the risk of death increases with age, the cost of insurance increases with age. Property-life insurance assumes that coastal properties will be lost at an unknown future date determined by the rate of sea level rise and patterns of catastrophic storms. As with human-life insurance, premiums would increase on a regular schedule through time. This predictable premium increase would create a powerful risk signal to incentivize adaptation.

Keywords: climate change, global warming, insurance, property casualty insurance, NFIP, flood insurance, life insurance, property insurance, extreme weather, flooding, hurricanes, Hurricane Sandy, Hurricane Katrina, coastal land loss

JEL Classification: R52, R53, R31, R38, R23, R14, Q48, Q32, Q15, Q33, K32, K11, I18, H71, H77, H53, H54, H31, H32, G22

Suggested Citation

Richards, Edward P., Applying Life Insurance Principles to Coastal Property Insurance to Incentivize Adaptation to Climate Change (June 1, 2016). Edward P Richards, Applying Life Insurance Principles to Coastal Property Insurance to Incentivize Adaptation to Climate Change, 43 Environmental Affairs Law Review 427–461 (2016).. Available at SSRN: https://ssrn.com/abstract=2788065

Edward P. Richards (Contact Author)

Louisiana State University, Baton Rouge - Paul M. Hebert Law Center ( email )

440 Law Center Building
Baton Rouge, LA 70803
United States

HOME PAGE: http://biotech.law.lsu.edu/

Register to save articles to
your library

Register

Paper statistics

Downloads
46
Abstract Views
402
PlumX Metrics