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Pricing of Climate Risk Insurance: Regulation and Cross‐Subsidies

SANGMIN S. OH et al.

The Journal of Finance2026https://doi.org/10.1111/jofi.70029article
FT50UTD24AJG 4*ABDC A*
Weight
0.50

Abstract

Homeowners insurance is central to managing the rising losses from climate‐related disasters. We show that insurance premiums are subject to starkly different regulations across states, creating persistent cross‐subsidies and price distortions. We employ states' regulatory rules in an instrumental variable estimation and a border discontinuity design to show insurers do not adjust rates in highly regulated states and compensate by raising rates in less regulated states. Rates and risks diverge in the long run, distorting cross‐state risk‐sharing and increasing insurer exits from highly regulated states. We argue these patterns stem from the interactions between rate regulation and insurers' financing constraints.

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https://doi.org/https://doi.org/10.1111/jofi.70029

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@article{sangmin2026,
  title        = {{Pricing of Climate Risk Insurance: Regulation and Cross‐Subsidies}},
  author       = {SANGMIN S. OH et al.},
  journal      = {The Journal of Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/jofi.70029},
}

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Pricing of Climate Risk Insurance: Regulation and Cross‐Subsidies

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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