Adaptation to Climate Change Risks and Regulation Through Insurance: The Case of China

Insurance transfers and spreads risk, including climate change risk. It can provide direct financial protection to those affected by climate change. It has received attention for its regulatory function in influencing policyholder behaviour. This is sometimes called ‘insurance as governance’, a form of private contractual regulation. This article examines the functions and limits of insurance in climate-related compensation and in governing complex climate-related risks by describing the variable performance of such insurance schemes in China. We show that insurance can perform a useful regulatory function in adaptation to climate change. However, we equally make clear that insurance can play this role only if an appropriate regulatory framework is provided. The case of China illustrates how the very lack of such a regulatory framework limits the role that insurers can play in climate change adaptation.