JOURNAL OF MANAGEMENT POLICY AND PRACTICE
Risk and Precautionary Approaches to Climate Change: Conceptual and Empirical
Lessons from the Insurance Industry
Author(s): Patrick G. Welle
Citation: Patrick G. Welle, (2012) "Risk and Precautionary Approaches to Climate Change: Conceptual and Empirical Lessons from the Insurance Industry," Journal of Management Policy and Practice, Vol. 13, Iss. 4, pp. 88 - 101
Article Type: Research paper
Publisher: North American Business Press
The concept of option value provides insight in weighing the countervailing risks of doing “Too Much Too Soon” or “Too Little Too Late” in addressing climate change. Option value represents profit potential to the insurance industry when it is positive, which occurs if people’s willingness to pay exceeds expected actuarial losses. Climate change could increase both the mean and the variability of actuarial losses. This paper reviews literature relating climate change to the insurance industry and summarizes empirical estimates of damage payments by private insurers. Public data on long-term trends in weatherrelated disaster and emergency relief payments are cited.