ABSTRACT
Weather insurance is one of the first commercial sectors to confront changing patterns of natural hazards. In the past few years, Greenpeace (1994; cf. also Leggett, 1993) started alarm bells ringing over the rapid increase in damage and claims due to natural hazards, which would be, if not the first sign of climate change, at least a warning of a warmer future. More careful analyses show that the larger part of this increased damage can be explained as increased socio-economic vulnerability (Berz and Conrad, 1993; Vellinga and Tol, 1993; Changnon and Changnon, 1992; Clark, 1988, 1991), and that the troubles in the insurance sector resulted from improper price setting and damage mitigation (Paish, 1994; Hindle, 1994). But changes in the average weather are bound to include changes in extremes, and these will affect the insurance industry in some way or another. Given the other problems of the sector, climate change places additional stress on the system, but the precise effect will depend on circumstances. This chapter looks at these issues in more detail. The two central questions here are: (1) what are the likely effects of climate change on the commercial weather insurance sector, and (2) to what extent is commercial weather insurance a suitable coping mechanism for climate change?
