Date of Completion

Spring 5-1-2021

Thesis Advisor(s)

Daniel Watt

Honors Major

Mathematics/Actuarial Science


Climate | Insurance | Sustainability


Climate change is the inevitable consequence of human activity since the industrial revolution began centuries ago. Assuming humanity survives and adapts to this scenario, there will be significant impacts on the economy and business. Under these circumstances, the insurance sector in particular will face challenges as the frequency and severity of losses increase due to climate change related events. This paper aims to analyze various options for allowing insurance to maintain viability in this changing environment. The general issue for the future is premiums must be commensurate with climate change related risk in affected areas. As a result, certain coastal regions and floodplains may be too risky to insure in an affordable manner. Indebted government programs such as the NFIP and FCIP will require significant adjustments in response to climate change. Insurer solvency could be an issue as traditional methods using historical data will be less effective for predicting catastrophes in a climate changed world. Extensive analysis of climate data and economic implications will be necessary. Climate legislation and carefully written policy language will be important for insurers to control costs. Insurers have always been incentivized to mitigate risk for their clients, and this concept will be of utmost importance in the future. Assisting customers with relocation of valuables in anticipation of a catastrophe or offering premium incentives for safe behavior are both viable options. Any successful response to climate change will require insurers to set plans in motion as soon as possible.