Climate Change Insurance: A Product Whose Time Has Come

Yale economics professor Robert J. Shiller, writing in The New York Times, notes the first stirring of what could become an important fixture of the world economy: insurance against the effects of climate change. He sees in the political response, or lack of it, to climate change the biggest example yet of a common phenomenon known as the “externality” problem: It can be in the interest of individual actors to export the cost of some activity or enterprise to the larger pool of actors, rather than constructively address it. The result is that climate change has not, and likely will not, be mitigated in any significant way, and we face “a real risk of new kinds of climate-related disaster.” He suggests new kinds of risk management, in the form of insurance and securitization, as a plausible and necessary response.