BusinessGreen, August 5, 2010
Policy brief calls for increased focus on insurance industry's ability to help manage climate risks
A group of academics working from the United Nations University think tank and industry-backed Munich Climate Insurance Initiative (MCII) have this week stepped up calls for diplomats at the Bonn climate talks to incorporate support for new insurance models into the draft negotiating text being prepared ahead of the Mexico Summit in November.
The group issued a 28-page policy brief entitled Solutions for Vulnerable Countries and People, arguing that pilot projects undertaken by the insurance industry suggest that the sector could play a key role in reducing climate change risks and leading climate adaptation projects.
"Our research over the past years has shown that insurance solutions – with co-ordinated public-private action and some international support – has the potential to help vulnerable countries and people adapt to climate change," said lead author Koko Warner. “Now it is time to move from knowledge to action. The need to link DRR and insurance and scaling them up is greater than ever to get the critical mass for adaptation."
The report cites a number of successful small-scale insurance projects that have helped poor communities reduce climate risks, including a microinsurance initiative in Malawi that allows farmers to insure themselves against the failure of maize crops and the Horn of Africa Risk Transfer for Adaptation which helps vulnerable farmers pay for insurance premiums through risk reducing labour such as improving irrigation channels.
However, it warns that without increased support for such projects as part of an international climate change agreement they will struggle to expand. As such it recommends that "a set of coherent, implementable adaptation measures including concrete measures for DRR and insurance at the micro-, meso-, and macro-level" should be included in the negotiating text being prepared for the Mexico Summit.
It also recommends that climate risk reduction measures should be included as part of the National Adaptation Programmes of Action (NAPA) put forward by countries as part of the Copenhagen Accord.
"Many risk management activities, such as risk identification and mapping, risk pricing, and vulnerability assessment, are useful for a variety of adaptation measures," the report concludes. "In this way, investing in risk reduction promises multiple dividends: lower losses, safeguarding development goals, lessened volatility for government planning and budgets, benefits for other adaptation measures."
Professor Peter Hoeppe, head of geo risks research at insurance giant Munich Re, which set up MCII in 2005, warned that without increased focus on adaptation measures developing countries were likely to face crippling weather-related risks.
"In the past three decades, 95 per cent of deaths from natural disasters happened in developing countries," he said. "In the last 10 years, economic losses averaged $100bn per year – people need help to manage increasing risks."