Climate Change and Risk Management: Challenges for Insurance, Adaptation, and Loss Estimation

Carolyn Kousky () and Roger M. Cooke ()
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Carolyn Kousky: Resources for the Future
Roger M. Cooke: Resources for the Future

Discussion Papers from Resources For the Future

Abstract: Adapting to climate change will not only require responding to the physical effects of global warming, but will also require adapting the way we conceptualize, measure, and manage risks. Climate change is creating new risks, altering the risks we already face, and also, importantly, impacting the interdependencies between these risks. In this paper we focus on three particular phenomena of climate related risks that will require a change in our thinking about risk management: global micro-correlations, fat tails, and tail dependence. Consideration of these phenomena will be particularly important for natural disaster insurance, as they call into question traditional methods of securitization and diversification.

Keywords: tail dependence; micro-correlations; fat tails; damage distributions; climate change (search for similar items in EconPapers)
JEL-codes: Q54 G22 C02 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-ias and nep-rmg
Date: 2009-02-04

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Persistent link: http://EconPapers.repec.org/RePEc:rff:dpaper:dp-09-03

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