The macroeconomic effects of the insurance climate protection gap
Title: The macroeconomic effects of the insurance climate protection gap
Abstract: We examine the role of insurance in mitigating the long-term macroeconomic effects and welfare impact of catastrophes, and the interplay between climate change and insurance coverage. We focus on the impact of more frequent and severe natural disasters as well as gradual changes in climate variables on physical capital. First, we develop a theoretical model of insurance, climate change, catastrophes and the macroeconomy as a basis for the analysis. Then, we test empirically the predictions from this model to explore how insurance has mitigated the impact of catastrophes in the past. Finally, we use these empirical results to explore the potential future impact of catastrophes using a range of climate-change related scenarios.