In principle there is no tradeoff at all. The premium on a structure in a specific location ought to depend on the risk of loss of that structure as designed and maintained. Premia create incentives to chose locations and designs with weather risks in mind. And those risk assessments should be based on models that are consistent with larger climate change models, forward, not backward looking.
Offhand it appears that in the past premia were not set appropriately and that too many of the wrongly designed assets were placed in harm's way. If that is the case, we should look at where the errors in decision making took place so they can be corrected.
Ultimately tho, your point *is* the trade-off. Appropriate insurance costs will drive down building in unsafe zones, meaning less people living in very desirable locations.
In principle there is no tradeoff at all. The premium on a structure in a specific location ought to depend on the risk of loss of that structure as designed and maintained. Premia create incentives to chose locations and designs with weather risks in mind. And those risk assessments should be based on models that are consistent with larger climate change models, forward, not backward looking.
Offhand it appears that in the past premia were not set appropriately and that too many of the wrongly designed assets were placed in harm's way. If that is the case, we should look at where the errors in decision making took place so they can be corrected.
https://thomaslhutcheson.substack.com/p/did-climate-change-cause-hurricane
https://thomaslhutcheson.substack.com/p/climate-risk-and-insurance
Ultimately tho, your point *is* the trade-off. Appropriate insurance costs will drive down building in unsafe zones, meaning less people living in very desirable locations.