Insurance Model Pushed As Adaptation Solution for Climate Change

09/09/2010
SustainableBusiness.com News

Four initiatives representing more than 100 international insurance companies are calling on governments worldwide to harness risk management techniques and insurance expertise to help the developing world adapt to climate change.

They say governments can increase the protection and reduce the vulnerability of developing world populations and economies from natural disasters through better risk management and by enabling insurance-type approaches.

ClimateWise, The Geneva Association, the Munich Climate Insurance Initiative (MCII) and the United Nations Environment Programme Finance Initiative (UNEP FI) joined together to release a statement aimed at world leaders and negotiators of the United Nations Framework Convention on Climate Change (UNFCCC).

The groups said the recent floods in Pakistan, China and Niger are a timely reminder that the world must adapt to become more resilient to the long-lasting and significant changes in climatic conditions being experienced across the world. These changes are likely to have the most damaging impacts on the developing world, where even small economic losses can have long-term effects on development, and where human health is generally less robust.

In the past three decades, direct global economic losses for all types of natural catastrophes have averaged US$90 billion per year, with 78% of those natural catastrophes being weather-related. Meanwhile, 85% of deaths associated with all natural catastrophes over that timescale have occurred in developing countries, according to 2010 figures produced by Munich Re.

There is enormous potential to be derived from a partnership-based approach to tackling the climatic risks faced by people and governments around the world. Indeed, several communities affected by climate change are already benefiting from projects that improve risk management and feature insurance elements.

Over 4500 Mongolian herders covered by a public-private index-insurance scheme are currently receiving indemnity payments totaling around US$1.4 million for cattle mortality losses caused by a particularly harsh winter.

And in September 2008, the Caribbean Catastrophe Risk Insurance Facility (CCRIF)--a public-private partnership--paid US$6.3 million to the Turks and Caicos Islands after Grand Turk was hit by Hurricane Ike.

The statement launched today underscores the view that risk management mechanisms are currently falling considerably short of their potential in delivering resilience benefits to the developing world. The insurance initiatives are therefore calling on governments to:

• Implement risk reduction measures already agreed at the 2005 World Conference on Disaster Reduction
• Provide a suitable enabling environment, including economic and regulatory frameworks, for risk management and insurance to function at all levels of society
• Invest in reliable risk exposure data and making it freely available to the public
• Act on lessons learned about the benefits of regional public-private partnerships and micro-insurance schemes which reduce losses for climatic risks

The statement released this week calls on governments to formally recognise the potential role for insurance in the United Nations climate change negotiations, and to open channels for dialogue at a national level.

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