Insurance and climate-driven extreme events

Our analytical results and computational experiments show that (i) transparency of the insurance sector is the decisive requisite for abatement activities, implying substantial policy opportunities; (ii) a decentralized economy will under-invest in abatement without adequate policy interventions; (iii) precautionary beliefs on the frequency of extreme events lead to more sustainability; (iv) a social security system which prices insurance fairly is preferable to an insurance industry which provides insurance with an overhead.