Insurance for an uncertain climate

March 24, 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 , 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:

  • Any new insurance scheme in developing countries needs to overcome difficult challenges, including lack of risk data, limited financial literacy, and weak financial infrastructure;
  • Insurance for the poor will only be viable if it is linked to adaptation and risk reduction efforts that reduce the underlying risk factors including climate-resilient infrastructure, adapted agricultural practices, and early warning systems; otherwise climate insurance will be short-lived and far from cost-effective;
  • Traditional insurance is an expensive mechanism with high transaction and capital costs, making premiums far higher than expected losses. This suggests that adaptation funds might be better spent on other types of safety net rather than on buying insurance cover from international insurance markets;
  • Insurance will need high levels of subsidies or other forms of support to render it affordable and to avoid shifting responsibility on to those who are the least responsible for climate change, the least able to shoulder the premiums, and in many cases the least able to reduce their losses.

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 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."

Explore further: New report on climate change adaptation and the insurance system

More information: April 2016. Swenja Surminski et al. How insurance can support climate resilience, Nature Climate Change (2016). DOI: 10.1038/nclimate2979

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6 comments

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gkam
1 / 5 (3) Mar 26, 2016
Insurance? Put that money into stopping AGW instead of playing money games.
Captain Stumpy
4 / 5 (4) Mar 26, 2016
Put that money into stopping AGW instead of playing money games.
did you even read the article?
no, you didn't, because
"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."
so what you advocate, liar-kam, is the wholesale ignoring of all poor folk so that you can continue to waste food, resources, lie/cheat/steal and commit fraud on an unsuspecting populace???? (fraud as in your admissions here: http://phys.org/n...age.html )
gkam
1 / 5 (3) Mar 26, 2016
No Capt. Stupid, I am advocating we use the money for actual help, not as monetary payoffs.

Like "ira" the pseudo-cajun, your attempts to find ways to discredit those who have done what you have not only expose your own character.
Captain Stumpy
5 / 5 (2) Mar 26, 2016
I am advocating we use the money for actual help
@liar-kam
so, by actual help, you mean help for your lifestyle and not help for the poor folk who actually need help occasionally because of the actions of the technologically advanced countries who are poisoning the atmosphere?
okee dokee then!

maybe you should re-read the article, and this part
"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."
not everyone is a "senior engineer" with cash to spare and so much in their life that any sane gang-banger would fear the karatechop of death you can bring to them because of your commando engineering background
[sarc/hyperbole]
gkam
1 / 5 (3) Mar 26, 2016
Your fixation on me is disturbing.

Have you considered getting psychological help?
Captain Stumpy
5 / 5 (2) Mar 26, 2016
Your fixation on me is disturbing.
@idiotLIAR-kam POS Troll
my fixation is on evidence, proof and science...

did you actually read the article yet?
NO?

imagine that

you are the one spreading misinformation, fraud, lies and blatantly stupid claims, not i

i found it far more interesting that you would attempt to appeal to other forums (Like Sapo) to try to get support for your lying hypocrisy and stupidity

why did you try that?
did you think that Sapo would write a nasty letter to PO or ScienceX defending your lies?

let me know when you got a moment
thanks

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