ABSTRACT
Consider a firm focused on the potential impacts and adaptation alternatives to changes in the distribution of tropical storms that strike the firm's coastal assets as a consequence of climate change. If the actual costs of adaptation exceed the estimated present value of insurance costs, then we could interpret that to mean that the asset is being over-engineered the required standard. The cost of adaptation can then be compared with the cost of insurance, or if the asset remains uninsured, the expected cost of a rebuild, plus the number of days of lost production. For instance, if the firm faces a single adaptation objective and the impact is measurable and the potential loss quantifiable, either the expected loss assessment or cost–benefit analysis (CBA) approach would be suitable to appropriately balance accuracy with completeness. CBA is often used to assess adaptation options when efficiency is the only decision-making criterion.
