Yesterday, I saw a fascinating presentation by Dianne Saxe: a lawyer who explained the legal liabilities that could arise as the result of climate change. The particular focus was on the government, and ways in which failure to effectively adapt to climate change could produce a legal risk. For instance, the government might be sued for failing to establish building standards that reflect our understanding that extreme weather events will get worse.
Legal liability and insurance are definitely very important elements of the climate change problem. Insurance companies probably have the most reason of anyone to get the most accurate and precise estimates about the various future impacts of climate change. In a world where mitigation does not occur rapidly enough, they will certainly find themselves with a lot of extreme new risks threatening their profitability: especially given how many of the probable impacts of climate change are included in existing property insurance. Climatic change that produces more intense windstorms is a major issue for you if you insure millions of houses and your policies include coverage for wind damage.
Arguably, the insurance industry and society-wide concerns about liability could be a good motivating force for making society more resilient to climate change. That is especially true when there is an opportunity to create price incentives: charging more (or refusing to offer coverage) for houses in hurricane zones, offering reduced premiums for houses built to withstand projected changes, and so forth. Of course, lots of ethical issues arise in connection with the governmental role. Sometimes, it is quite legitimate for government to step in and mandate that insurance be provided to a certain group, or for a reasonable price. At other times, such interventions undermine the ability of insurers to encourage sensible behaviour.
It will be a very interesting area to watch: both in terms of the commercial decisions taken by insurance companies and in relation to court cases and new precedents that arise.