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An imperfect storm: Fat-tailed tropical cyclone damages, insurance, and climate policy

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  • Conte, Marc N.
  • Kelly, David L.

Abstract

We perform two tests that estimate the mass of the upper tail of the distribution of aggregate US tropical cyclone damages. Both tests reject the hypothesis that the distribution of damages is thin tailed at the 95% confidence level, even after correcting for inflation and growth in population and per capita income. Our point estimates of the shape parameter of the damage distribution indicate that the distribution has finite mean, but infinite variance.

Suggested Citation

  • Conte, Marc N. & Kelly, David L., 2018. "An imperfect storm: Fat-tailed tropical cyclone damages, insurance, and climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 677-706.
    • Handle: RePEc:eee:jeeman:v:92:y:2018:i:c:p:677-706
    DOI: 10.1016/j.jeem.2017.08.010
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    2. Indaco, Agustín & Ortega, Francesc & Taspinar, Süleyman, 2018. "The Effects of Flood Insurance on Housing Markets," IZA Discussion Papers 11810, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Natural disasters; Catastrophes; Fat tails; Tropical cyclones; Hurricanes; Adaptation; Disaster aid; Property insurance;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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