The Government’s Role in Climate Change Insurance

Abstract

There are no robust insurance markets for climate change insurance. While these markets would provide valuable loss-mitigation incentives, at the same time giving financial certainty to individuals and businesses that face staggering future liabilities, existing efforts have produced a fragmented set of private and public products that provide only piecemeal coverage. This Article examines the government’s role in providing unified markets for insuring climate change risk. Although innovations in reinsurance markets suggest that private insurers could cover discrete risks associated with climate change, such as flood or wind loss, climate change’s broader systemic risks present problems of scale and scope that public insurance is better positioned to handle. This Article draws lessons from existing insurance programs to show both why purely private insurance would be inappropriate for a robust climate change insurance market, as well as how a nationally provided insurance program could be designed to avoid past problems.