24 March 2016
In December, negotiators at the Paris climate meeting adopted insurance as an instrument to aid climate adaptation. Earlier in the year, the leaders of the G7 pledged to bring climate insurance to 400 million uninsured individuals in poor countries by 2020.
In a new article in the journal Nature Climate Change, experts from the London School of Economics and Political Science, Deltares and International Institute for Applied Systems Analysis welcome these developments, but also lay out the difficulties that policymakers will face in turning the ideas into action. They warn that ill-designed and poorly implemented insurance instruments could fail to reach the goals of negotiators, or worse, prove detrimental to the very people they are intended to protect.
Swenja Surminski, Senior Research Fellow the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science led the article. She says, “Poor communities are much more impacted by extreme weather such as floods, droughts, and heatwaves. Rather than ad-hoc and unpredictable payments after these events, insurance approaches can be set up in advance of these impacts, and be more efficient and provide better support to these vulnerable people”
Bayer was one of the first to propose insurance as a mechanism to reimburse people for the impacts of climate change, and to examine the potential benefits and trade-offs of such policies. She says, “With the new momentum we have for these policies, we now have the opportunity to put the right insurance systems in place.”
While insurance could provide funding to help people in need, the researchers point out several ways that such mechanisms could fail:
In order to avoid these problems, the researchers argue, policymakers should consider climate insurance as part of a wider adaptation strategy rather than in isolation or as an alternative to adaptation.
Surminski points to her recent reviews of insurance schemes in developing countries and says, “When installing an insurance scheme, climate change and other factors contributing to the risks need to be taken into account. Insurance needs to be coupled to adaptation efforts to deal with these risk factors, otherwise climate insurance will be not be sustainable nor cost-effective.
Laurens M. Bouwer from Deltares, another coauthor, adds, “What is critical for any adaptation or insurance scheme is that we understand current and future risks from extreme weather sufficiently, in order to make the right decisions. Here, the experience and tools for risk assessment can help.”
Surminski, S., Bouwer, L.M. & Linnerooth-Bayer, J. (2016). How insurance can support climate resilience. Nature Climate Change. DOI: 10.1038/NCLIMATE2979
Last edited: 23 March 2016
Warner, K., Kreft, S., Zissener, M., Hoeppe, P., Bals, C., Loster, T., & Linnerooth-Bayer, J. (2013). Insurance solutions in the context of climate-change-related loss and damage: Needs, gaps and roles of the UNFCCC in addressing loss and damage. In: Climate Change: International Law and Global Governance (Volume 2). Eds. Ruppel, OC, Roschmann, C & Ruppel-Schlichting, K, Germany pp.877-923: Nomos. ISBN 978-3-8329-7796-2
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Linnerooth-Bayer, J., Bals, C., & Mechler, R. (2010). Insurance as part of a climate adaptation strategy. In: Making Climate Change Work for Us. Eds. Hulme, M. & Neufedlt, H., Cambridge: Cambridge University Press. ISBN 980521119412
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