Insurance company-based solution to things like global warming?

Economics Economics Questions
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Ya’ll,

I’ve been thinking about problems like global warming, holes in the ozone layer, etc. I don’t want to discuss whether these things are or are not problems, but rather assume that they are major problems and that non-state solutions must be found.

Assumptions: If the cause of a given environmental degradation can be identified, it would be better if this environmental degradation could be curbed rather than allowed to continue. One could argue with me on this, but I’m taking it as a given that unnecessary environmental degradation is bad, and that the ability to compensate for it later is besides the point. I’m also taking it as a given that “environmental degradation” is not a controversial phrase.

Main point: It seems to me that insurance companies might be a good solution to these sorts of problems. Here’s how: insurance companies normally do not stick to one location or type of insurance, but rather offer many types of insurance over many locations; thus, harm that comes to people in one insured geographical area due to the actions within another insured geographical area means loss for the insurer. If insurance companies were allowed to act freely, I think it is at least probable that insurers would start placing any necessary constraints on their insurees so as to prevent one group of insurees from damaging another group.

I don’t think this idea is terribly original, and I would appreciate any links to papers that talk about just this. However, I have a problem with this idea: there would never be a monopoly in insurance, so how would two different firms necessarily arbitrate to minimize the damages which are inflicted on themselves by one anothers’ insurees? For instance, if Firm A insures beach-front properties but not too many industrial properties, and Firm B’s insurees generate a lot of green-house gases but don’t own a lot of beach-front properties, how might their interests be brought into harmony such that Firm B begins to constraint its insurees so as not to be responsible for damages inflicted on Firm A?

Regards,
Tele

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Since there is no clear model for climate change, no insurance company could effectively underwrite “climate change protection”.

Once coastal cities start sinking below ocean level, and that is a big IF such events occur, it might become more realistic. You can insure just about anything, like against alien attacks, but it is arguably not in one’s best interest to do so. The insurance company would have to stack the odds heavily in their favor to even consider writing a policy.

Regarding your arbitration hypo, the case would be solved as with any other tort. One would, again, need some accepted climate change theory in order to have any sort of valid claim.

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Damn, lol. [:p]

Remove the state, property rights in air, pollution etc spring forth and let the market sort it out - as it will.