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Journal Article

Insurance against extreme weather events: An overview


Kraehnert,  Kati
Potsdam Institute for Climate Impact Research;

Osberghaus,  Daniel
External Organizations;

Hott,  Christian
External Organizations;


Habtemariam,  Lemlem Teklegiorgis
Potsdam Institute for Climate Impact Research;

Wätzold,  Frank
External Organizations;

Hecker,  Lutz Philipp
External Organizations;


Fluhrer,  Svenja
Potsdam Institute for Climate Impact Research;

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Kraehnert, K., Osberghaus, D., Hott, C., Habtemariam, L. T., Wätzold, F., Hecker, L. P., Fluhrer, S. (2021): Insurance against extreme weather events: An overview. - Review of Economics, 72, 2, 71-95.

Cite as: https://publications.pik-potsdam.de/pubman/item/item_25998
Extreme weather events increasingly threaten the economic situation of households and enterprises around the world. Insurance against extreme weather events is among the climate change adaptation instruments that are currently discussed by the policy community. This overview paper provides a synopsis of the state of research on insurance against extreme weather events, outlining advantages and limitations inherent in three main types of insurance: indemnity-based insurance, index-based insurance, and insurance-linked securities. The paper discusses issues related to insurance uptake, distributional effects, misleading incentives and potentially negative side effects, as well as the role of the state.