IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v33y2025i6p8499-8510.html

Climate Change and Insurance: Embracing Resilience for Private Market Survival

Author

Listed:
  • John A. Roper
  • David G. Casagrande
  • Paolo Bocchini

Abstract

Private insurance is a major mechanism for managing natural disaster risk in the U.S. Public programs cannot generate sufficient capital to provide adequate protection to homes and businesses. Our literature review indicates that disaster impacts are increasing because of climate change and continuing development in high‐risk areas, which is undermining methods used by private insurance and reinsurance industries to spread risk, including premium pricing, peril region pooling, and catastrophe bonds. Financial sustainability could be enhanced by investing in resilience and expanding coverage to vulnerable populations where property owners lack capital for resilience improvements and slow recovery times increase business interruption losses. Public–private partnerships using tools like resilience bonds would benefit both the public and private sectors, as well as local businesses and homeowners. We describe how catastrophe modeling can estimate financial savings from reduced losses and optimize resilience bond pricing, rebates, and investment return.

Suggested Citation

  • John A. Roper & David G. Casagrande & Paolo Bocchini, 2025. "Climate Change and Insurance: Embracing Resilience for Private Market Survival," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(6), pages 8499-8510, December.
    • Handle: RePEc:wly:sustdv:v:33:y:2025:i:6:p:8499-8510
    DOI: 10.1002/sd.70106
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.70106
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.70106?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Abigail Peralta & Jonathan B. Scott, 2024. "Does the National Flood Insurance Program Drive Migration to Higher Risk Areas?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(2), pages 287-318.
    2. Stanley L. Brue, 1993. "Retrospectives: The Law of Diminishing Returns," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 185-192, Summer.
    3. Alfredo M. Pereira, 2001. "On the Effects of Public Investment on Private Investment: What Crowds in What?," Public Finance Review, , vol. 29(1), pages 3-25, January.
    4. Morana, Claudio & Sbrana, Giacomo, 2019. "Climate change implications for the catastrophe bonds market: An empirical analysis," Economic Modelling, Elsevier, vol. 81(C), pages 274-294.
    5. Andy Polacek, 2018. "Catastrophe Bonds: A Primer and Retrospective," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    6. Bilal, Adrien & Känzig, Diego, 2024. "The Macroeconomic Impact of Climate Change: Global vs. Local Temperature," CEPR Discussion Papers 19203, Centre for Economic Policy Research.
    7. Jesse D. Gourevitch & Carolyn Kousky & Yanjun (Penny) Liao & Christoph Nolte & Adam B. Pollack & Jeremy R. Porter & Joakim A. Weill, 2023. "Unpriced climate risk and the potential consequences of overvaluation in US housing markets," Nature Climate Change, Nature, vol. 13(3), pages 250-257, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karl Demers‐Bélanger & Van Son Lai, 2020. "Diversification benefits of cat bonds: An in‐depth examination," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 29(5), pages 165-228, December.
    2. Broeders, Dirk & Dimitrov, Daniel & Verhoeven, Niek, 2025. "Climate-linked bonds," Working Paper Series 3011, European Central Bank.
    3. repec:rim:rimwps:25-01 is not listed on IDEAS
    4. Wylie, David & Amornsiripanitch, Natee & Heilbron, John & Zhao, Kevin, 2025. "JUE Insights: Who bears climate-related physical risk?," Journal of Urban Economics, Elsevier, vol. 149(C).
    5. Richard Frankel & S. P. Kothari & Aneesh Raghunandan, 2025. "The economics of ESG disclosure regulation," Review of Accounting Studies, Springer, vol. 30(4), pages 3218-3253, December.
    6. Liao, Yanjun (Penny) & Walls, Margaret A. & Wibbenmeyer, Matthew, 2024. "Facing Wildfire Insurance Challenges: Five Lessons from the National Flood Insurance Program," RFF Reports 24-12, Resources for the Future.
    7. Thomas Mutsvene & Heinz Eckart Klingelhöfer, 2024. "Development of New Products for Climate Change Resilience in South Africa—The Catastrophe Resilience Bond Introduction," JRFM, MDPI, vol. 17(5), pages 1-16, May.
    8. Chauvet, Marcelle & Morana, Claudio & Silva, Murilo, 2026. "Extreme weather in Europe: Determinants and economic impact," European Economic Review, Elsevier, vol. 186(C).
    9. Aggarwal, Raavi & Missbach, Leonard & Somanathan, E. & Steckel, Jan Christoph & Sterner, Thomas, 2025. "Negative health effects of carbon prices can outweigh the climate benefits in developing countries," EfD Discussion Paper 25-9, Environment for Development, University of Gothenburg.
    10. Yuan, Zhengrong & Ding, Hai & Yu, Qiuzuo, 2024. "High temperature, bargaining power and within-firm wage inequality: Evidence from China," Economic Modelling, Elsevier, vol. 135(C).
    11. Jacob Dice & Mallick Hossain & David Rodziewicz, 2024. "Flood Risk Exposures and Mortgage-Backed Security Asset Performance and Risk Sharing," Research Working Paper RWP 24-05, Federal Reserve Bank of Kansas City.
    12. Cherchye, Laurens & Kuosmanen, Timo & Post, Thierry, 2001. "Alternative treatments of congestion in DEA: A rejoinder to Cooper, Gu, and Li," European Journal of Operational Research, Elsevier, vol. 132(1), pages 75-80, July.
    13. Tarsia, Romano, 2024. "Heterogeneous effects of weather shocks on firm economic performance," LSE Research Online Documents on Economics 124251, London School of Economics and Political Science, LSE Library.
    14. Riccardo Gozzo, 2025. "Adaptive Multilevel Splitting: First Application to Rare-Event Derivative Pricing," Papers 2510.23461, arXiv.org, revised Jan 2026.
    15. B. N. Porfiriev & A. Yu. Kolpakov & E. A. Lazeeva, 2025. "Assessing the Impact of Climate Change on the Russian Economy Using Integrated Assessment Models (IAM)," Studies on Russian Economic Development, Springer, vol. 36(1), pages 35-44, February.
    16. Vicente Ferreira & Joao Pedro Ferreira & Dario Guarascio & Francesco Zezza, 2024. "Shockflation in the EU: sectoral shocks, cost-push inflation and structural asymmetries in core and periphery countries," LEM Papers Series 2024/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    17. Qiannan Zhu & Zhengyu Zhang, 2025. "The Impact of Artificial Intelligence on Energy Conservation and Emission Reduction: Evidence From China's Listed Firms," International Studies of Economics, John Wiley & Sons, vol. 20(4), pages 410-430, December.
    18. Kumar, Naveen & Maiti, Dibyendu, 2025. "Climate change, state capacity and uneven growth: A disaggregated analysis of India," Economic Modelling, Elsevier, vol. 153(C).
    19. García-Gómez, Conrado Diego & Demir, Ender & Díez-Esteban, José María, 2026. "How climate vulnerability affects IPO activity: Evidence from OECD countries," Research in International Business and Finance, Elsevier, vol. 84(C).
    20. Pablo Garcia Sanchez & Olivier Pierrard, 2026. "The rich, the poor, and the carbon tax," BCL working papers 205, Central Bank of Luxembourg.
    21. Jorge M. Andraz & Nélia M. Norte & Hugo S. Gonçalves, 2016. "Do tourism spillovers matter in regional economic analysis? An application to Portugal," Tourism Economics, , vol. 22(5), pages 939-963, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:sustdv:v:33:y:2025:i:6:p:8499-8510. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.