3:30 pm - 5:00 pm
GSB 550, 9007 116 St NW, Edmonton AB, Edmonton AB
Title: Climate Change and the Regulation of a Crashing Insurance Market
Speaker: Dr. Madeline Turland, Assistant Professor, Dept. of Resource Economics and Environmental Sociology, University of Alberta
Date: Friday, October 25, 2024
Time: 3:30pm – 5:00pm
Location: GSB 550
Abstract:
In this paper, we examine how regulation and market structure can lead to market unraveling when firms face rapidly increasing risk due to climate change. We first present a simple model of an adversely selected disaster insurance market to investigate how price regulation and increasing climate costs impact private markets in the presence of an insurer of last resort. We then empirically study the California non-renewal moratoriums, a first-of-its-kind regulation aimed at stymieing the retreat of insurance companies from high wildfire risk areas by forcing insurers to supply insurance to current customers following disasters in 2019 and 2020. Using quasi-random geographic variation in regulatory borders and a difference-in-differences identification strategy, we find that the moratoriums successfully reduced company-initiated non-renewals in the short run. However, the effects only lasted for one year, with insurers dropping policies as soon as the moratorium lapsed. Additionally, the moratoriums had no discernible effect on participation in the State’s insurer of last resort.
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