Climate risk insurance

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Flooded building in Si Phan Don, Laos, September 2019 Flooded building and tree trunk in the muddy water of the Mekong in Si Phan Don, Laos, September 2019.jpg
Flooded building in Si Phan Don, Laos, September 2019

Climate risk insurance is a type of insurance designed to mitigate the financial and other risk associated with climate change, especially phenomena like extreme weather. [1] [2] [3] The insurance is often treated as a type of insurance needed for improving the climate resilience of poor and developing communities. [4] [5] [6] It provides post-disaster liquidity for relief and reconstruction measures while also preparing for the future measures in order to reduce climate change vulnerability. Insurance is considered an important climate change adaptation measure.

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Critics of the insurance, say that such insurance places the bulk of the economic burden on communities responsible for the least amount of carbon emissions. [5] For low-income countries, these insurance programmes can be expensive due to the high start-up costs and infrastructure requirements for the data collection. [7] It is theorised that high-premiums in high risk areas experiencing increased climate threats, would discourage settlement in those areas. [1] These programmes are also usually timely and financially inadequate, which could be an uncertainty to national budgets. [7] A considerable problem on a micro-level is that weather-related disasters usually affect whole regions or communities at the same time, resulting in a large number of claims simultaneously. [8] This means that it is needed to be sold on a very large, diversified scale. [8] However a well-designed climate risk insurance can act as a safety net for countries while improving resilience. [6] [9]

The international community invested in developing further support for this kind of insurance through the InsuResilience Global Partnership launched at COP23. [5] That group, supports regional programs such as Climate Risk Adaptation and Insurance in the Caribbean (CRAIC) and international organizations like the Munich Climate Insurance Initiative. [5] The ACT Alliance published a guidebook for equitable and climate justice oriented model for climate risk insurance in 2020. [10]

Types of climate risk insurance

Flood insurance

The rising climate change related risks, such as sea level rise, floods and windstorms, threaten the livability and affordability of the impacted areas. [11] This is why one of the more widely used forms of climate risk insurance is flood insurance, which provides coverage against loss caused by flooding. [11]

Related Research Articles

<span class="mw-page-title-main">Natural disaster</span> Major adverse event resulting from natural processes of the Earth

A natural disaster is the highly harmful impact on a society or community following a natural hazard event. Some examples of natural hazard events include: flooding, drought, earthquake, tropical cyclone, lightning, tsunami, volcanic activity, wildfire. A natural disaster can cause loss of life or damage property, and typically leaves economic damage in its wake. The severity of the damage depends on the affected population's resilience and on the infrastructure available. Scholars have been saying that the term natural disaster is unsuitable and should be abandoned. Instead, the simpler term disaster could be used, while also specifying the category of hazard. A disaster is a result of a natural or human-made hazard impacting a vulnerable community. It is the combination of the hazard along with exposure of a vulnerable society that results in a disaster.

<span class="mw-page-title-main">Climate change adaptation</span> Process of adjusting to effects of climate change

Climate change adaptation is the process of adjusting to the effects of climate change. These can be both current or expected impacts. Adaptation aims to moderate or avoid harm for people, and is usually done alongside climate change mitigation. It also aims to exploit opportunities. Humans may also intervene to help adjustment for natural systems. There are many adaptation strategies or options. They can help manage impacts and risks to people and nature. The four types of adaptation actions are infrastructural, institutional, behavioural and nature-based options.

In its broadest sense, social vulnerability is one dimension of vulnerability to multiple stressors and shocks, including abuse, social exclusion and natural hazards. Social vulnerability refers to the inability of people, organizations, and societies to withstand adverse impacts from multiple stressors to which they are exposed. These impacts are due in part to characteristics inherent in social interactions, institutions, and systems of cultural values.

<span class="mw-page-title-main">Disaster risk reduction</span> Preventing new and reducing existing disaster risk factors

Disaster risk reduction (DRR) is a systematic approach to identifying, assessing and reducing the risks of disaster. It aims to promote sustainable development by increasing the resilience of communities to any disasters they might face. DRR is normally used as policies intended to "define goals and objectives across different timescales and with concrete targets, indicators and time frames." The concept is also called disaster risk management (DRM).

<span class="mw-page-title-main">Climate change in South Asia</span> Emissions, impacts and responses of South Asian countries related to climate change

Climate change in South Asia is having significant impacts already which are expected to intensify as global temperatures rise due to climate change. The South Asia region consists of the eight countries: Afghanistan, Pakistan, India, Nepal, Bhutan, Bangladesh, the Maldives and Sri Lanka. In the 2017 edition of Germanwatch's Climate Risk Index, Bangladesh and Pakistan ranked sixth and seventh respectively as the countries most affected by climate change in the period from 1996 to 2015, while India ranked fourth among the list of countries most affected by climate change in 2015. The Indian subcontinent is one of the most vulnerable regions globally to a number of direct and indirect effects of climate change, including sea level rise, cyclonic activity, and changes in ambient temperature and precipitation patterns. Ongoing sea level rise has already submerged several low-lying islands in the Sundarbans region, displacing thousands of people.

Climate risk is the potential for problems for societies or ecosystems from the impacts of climate change. The assessment of climate risk is based on formal analysis of the consequences, likelihoods and responses to these impacts. Societal constraints can also shape adaptation options. There are different values and preferences around risk, resulting in differences of risk perception.

<span class="mw-page-title-main">Ecological resilience</span> Capacity of ecosystems to resist and recover from change

In ecology, resilience is the capacity of an ecosystem to respond to a perturbation or disturbance by resisting damage and subsequently recovering. Such perturbations and disturbances can include stochastic events such as fires, flooding, windstorms, insect population explosions, and human activities such as deforestation, fracking of the ground for oil extraction, pesticide sprayed in soil, and the introduction of exotic plant or animal species. Disturbances of sufficient magnitude or duration can profoundly affect an ecosystem and may force an ecosystem to reach a threshold beyond which a different regime of processes and structures predominates. When such thresholds are associated with a critical or bifurcation point, these regime shifts may also be referred to as critical transitions.

<span class="mw-page-title-main">Flood control</span> Methods used to reduce or prevent the detrimental effects of flood waters

Flood control methods are used to reduce or prevent the detrimental effects of flood waters. Flood relief methods are used to reduce the effects of flood waters or high water levels. Flooding can be caused by a mix of both natural processes, such as extreme weather upstream, and human changes to waterbodies and runoff. A distinction is made between structural and non-structural flood control measures. Structural methods physically restrain the flood waters, whereas non-structural methods do not. Building hard infrastructure to prevent flooding, such as flood walls, is effective at managing flooding. However, increased best practice within landscape engineering is to rely more on soft infrastructure and natural systems, such as marshes and flood plains, for handling the increase in water. To prevent or manage coastal flooding, coastal management practices have to handle natural processes like tides but also the human-caused sea level rise.

<span class="mw-page-title-main">Water security</span> A goal of water management to harness water-related opportunities and manage risks

The aim of water security is to make the most of water's benefits for humans and ecosystems. The second aim is to limit the risks of destructive impacts of water to an acceptable level. These risks include for example too much water (flood), too little water or poor quality (polluted) water. People who live with a high level of water security always have access to "an acceptable quantity and quality of water for health, livelihoods and production". For example, access to water, sanitation and hygiene services is one part of water security. Some organizations use the term water security more narrowly for water supply aspects only.

<span class="mw-page-title-main">Climate change in Bangladesh</span> Emissions, effects and responses of Bangladesh related to climate change

Climate change is a critical issue in Bangladesh as the country is one of the most vulnerable to the effects of climate change. In the 2020 edition of Germanwatch's Climate Risk Index, it ranked seventh in the list of countries most affected by climate calamities during the period 1999–2018. Bangladesh's vulnerability to the effects of climate change is due to a combination of geographical factors, such as its flat, low-lying, and delta-exposed topography, and socio-economic factors, including its high population density, levels of poverty, and dependence on agriculture. The impacts and potential threats include sea level rise, temperature rise, food crises, droughts, floods, and cyclones.

Vulnerability refers to "the quality or state of being exposed to the possibility of being attacked or harmed, either physically or emotionally." The understanding of social and environmental vulnerability, as a methodological approach, involves the analysis of the risks and assets of disadvantaged groups, such as the elderly. The approach of vulnerability in itself brings great expectations of social policy and gerontological planning. Types of vulnerability include social, cognitive, environmental, emotional or military.

<span class="mw-page-title-main">Climate change in Nepal</span> Emissions, impacts and responses of Nepal related to climate change

Globally, Nepal is ranked fourth in terms of vulnerability to climate change. Floods spread across the foothills of the Himalayas and bring landslides, leaving tens of thousands of houses and vast areas of farmland and roads destroyed. In the 2020 edition of Germanwatch's Climate Risk Index, it was judged to be the ninth hardest-hit nation by climate calamities during the period 1999 to 2018. Nepal is a least developed country, with 28.6 percent of the population living in multidimensional poverty. Analysis of trends from 1971 to 2014 by the Department of Hydrology and Meteorology (DHM) shows that the average annual maximum temperature has been increasing by 0.056 °C per year. Precipitation extremes are found to be increasing. A national-level survey on the perception-based survey on climate change reported that locals accurately perceived the shifts in temperature but their perceptions of precipitation change did not converge with the instrumental records. Data reveals that more than 80 percent of property loss due to disasters is attributable to climate hazards, particularly water-related events such as floods, landslides and glacial lake outburst floods (GLOFs).

Climate resilience is a concept to describe how well people or ecosystems are prepared to bounce back from certain climate hazard events. The formal definition of the term is the "capacity of social, economic and ecosystems to cope with a hazardous event or trend or disturbance". For example, climate resilience can be the ability to recover from climate-related shocks such as floods and droughts. Methods of coping include suitable responses to maintain relevant functions of societies and ecosystems. To increase climate resilience means one has to reduce the climate vulnerability of people and countries. Efforts to increase climate resilience include a range of social, economic, technological, and political strategies. They have to be implemented at all scales of society, from local community action all the way to global treaties.

Community resilience is the sustained ability of a community to use available resources to respond to, withstand, and recover from adverse situations. This allows for the adaptation and growth of a community after disaster strikes. Communities that are resilient are able to minimize any disaster, making the return to normal life as effortless as possible. By implementing a community resilience plan, a community can come together and overcome any disaster, while rebuilding physically and economically.

<span class="mw-page-title-main">Nature-based solutions</span> Sustainable management and use of nature for tackling socio-environmental challenges

Nature-based solutions is the sustainable management and use of natural features and processes to tackle socio-environmental issues. These issues include for example climate change, water security, food security, preservation of biodiversity, and disaster risk reduction. Through the use of NBS healthy, resilient, and diverse ecosystems can provide solutions for the benefit of both societies and overall biodiversity. The 2019 UN Climate Action Summit highlighted nature-based solutions as an effective method to combat climate change. For example, NBS in the context of climate action can include natural flood management, restoring natural coastal defences, providing local cooling, restoring natural fire regimes.

<span class="mw-page-title-main">Climate change in the Philippines</span> Impact of climate change on the Philippines

Climate change is having serious impacts in the Philippines such as increased frequency and severity of natural disasters, sea level rise, extreme rainfall, resource shortages, and environmental degradation. All of these impacts together have greatly affected the Philippines' agriculture, water, infrastructure, human health, and coastal ecosystems and they are projected to continue having devastating damages to the economy and society of the Philippines.

<span class="mw-page-title-main">Climate change in Afghanistan</span> Emissions, impacts and responses of Afghanistan related to climate change

In Afghanistan, climate change has led to a temperature increase of 1.8 °C since 1950. This has caused far-reaching impacts on Afghanistan, culminating from overlapping interactions of natural disasters, conflict, agricultural dependency, and severe socio-economic hardship.

<span class="mw-page-title-main">Climate change in Kenya</span> Emissions, impacts and responses of Kenya related to climate change

Climate change is posing an increasing threat to global socio-economic development and environmental sustainability. Developing countries with low adaptive capacity and high vulnerability to the phenomenon are disproportionately affected. Climate change in Kenya is increasingly impacting the lives of Kenya's citizens and the environment. Climate Change has led to more frequent extreme weather events like droughts which last longer than usual, irregular and unpredictable rainfall, flooding and increasing temperatures.

<span class="mw-page-title-main">Climate change vulnerability</span> Assessment of relative vulnerability to climate change and its effects

Climate change vulnerability is a concept that describes how strongly people or ecosystems are likely to be affected by climate change. Its formal definition is the "propensity or predisposition to be adversely affected" by climate change. It can apply to humans and also to natural systems. Issues around the capacity to cope and adapt are also part of this concept. Vulnerability is a component of climate risk. Vulnerability differs within communities and also across societies, regions, and countries. It can increase or decrease over time.

<span class="mw-page-title-main">C. Emdad Haque</span>

C. Emdad Haque is a Canadian academic, environmentalist, and author. He is a professor in the Natural Resources Institute of the Clayton H. Riddell Faculty of Environment, Earth, and Resources at the University of Manitoba and Chief Technical Advisor at the Bangabandhu Centre of Bangladesh Studies in Canada.

References

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  4. MAKING CLIMATE RISK INSURANCE WORK FOR THE MOST VULNERABLE: SEVEN GUIDING PRINCIPLES (PDF) (Report). MUNICH CLIMATE INSURANCE INITIATIVE. 2016.
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