Climate vulnerable regions get insurance boost

June 18, 2011

Ecosystem adaptation model fits with the compensation instruments

June 11/ Bonn

By Aditya Ghosh

Bonn, June 11: Ecosystem based adaptation to climate change impacts has emerged as the most cost-effective method both for climate insurance schemes and developing resilience in communities to combat climate change.

For insurance to be successful, the model has to be a public private partnership. “We have learnt from the studies we have conducted around the world that it could be significant tool in helping communities adapt and be resilient. However, any scheme must be preceded by quantifying impacts of climate change for the region, introducing hard measures, planning for emergency responses,” said Andreas Spiegel, senior climate change advisor, Swiss RE, a global reinsurer of climate risks.

In a forum organized by UN Environment Programme (UNEP) during Bonn climate talks, experts from divergent fields of climate change unanimously accepted that ecosystem based adaptations proved most successful in helping vulnerable communities to adapt. “In our experience from the mountains of Nepal, a project currently jointly being carried out with UNEP and IUCN, ecosystem based adaptation has clear advantage over let’s say, community based adaptation,” said Edmund Barrow, head ecosystem management programme, IUCN.

In terms of insurance, which has emerged as a key instrument after Cancun Agreements when Alliance of Small Island Nations (AOSIS) successfully introduced the concepts of loss and damage in the negotiation text, the success depended heavily on partnerships between the public and private sectors.

Public sector should facilitate risk assessment and quantify risks, implement economically suitable adaptation measures, and then transfer the risks by linking them to private insurance sector. Distribution channel of insurance policies should link private and public sectors with the capital markets.

Climate related damages is already leading to serious economic implications and by 2020 local GDP losses, for example, will be to the tune of 2.1 per cent for the state of Maharashtra and 6 per cent for the state of Florida.

It was also possible to insure states. A similar model, Caribbean catastrophe risk insurance provides immediate liquidity to 16 participating CARICOM governments.
But the companies must not look at profit margins as their yardstick, said a climate negotiator from Bangladesh. “Th
ere has to be an element of corporate social responsibility as well. Models can be evolved case-by-case and in consultation with the governments,” he said.
Vulnerable countries such as Bangladesh must develop robust weather data provision services and map asset statistics about geographical distribution. Fund loss modeling agencies should then develop loss models correlating the weather data and asset losses per asset category. “This will then be a model for the private sectors to cover the risks,” said Spiegel.

Harita - Horn of Africa risk transfer for adaptation project

It is a parametric insurance scheme that brings together climate change risk mitigation and crop insurance for farmers and has been rolled out in five communities in Northern Ethiopia. Underwritten by a local company, and reinsured by a global reinsurer, it uses a rainfall index to trigger compensation for farmers growing the Ethiopian three staple grain crops in case of drought. It is unique, however, in allowing farmers to pay for their premiums through labour on projects that will mitigate the effect of climate change in their area, such as tree planting.

To turn the labour into monetary value, the scheme takes advantage of a national government “cash for work” programme, which enables it to reach the most vulnerable farmers. HARITA therefore integrates insurance with both risk reduction and credit provision. By allowing very vulnerable farmers to pay their premiums through risk-reducing labour, farmers benefit even when there is no payout because these risk reduction activities will help minimise vulnerability to drought and improve yields.

Lack of cash is the main reason that people do not participate in insurance schemes. Using this government national cash for work programme is a way to address this issue and to scale up the size of the programme. Cash-paying farmers also participate in the programme, advancing market development. The programme will roll out to the Tigray region in 2011.

 

Hard evidence
 
World Banks’ double-handedness
imageA report released by Friends of the Earth shows how the World Bank hit a new record in 2010 for annual fossil fuel lending at $4.7 billion, increasing its coal-related spending alone by 256 percent. The World Bank has now been made a trustee of the Green Climate Fund which will administer the flow of funds from developed to developing countries to cope with climate change, which includes deploying 'clean energy' solutions.

See full report »

 


Highest ever recorded GHG emissions were reached in 2010
imageThe world CO2 emissions have hit a record high in 2010 at 30.6 gigatonnes, according to a recent study by the IEA. This is a 5% increase from previous record of 29.3 Gt in 2008. An IEA scenario sets the emissions limit at 32 Gigatonnes for 2020 in order to stay within the “safe” 2 degrees Celsius rise. This means that the rise in emissions for the next 10 years needs to be lesser than that between 2009 and 2010.

See full report >>

 


A Financial Transaction Tax could effectively address climate finance woes
imageA new report from CIDSE throws light on how the climate financing challenge can be met by taxing global financial transactions. A financial transaction tax, such as this, introduced at a mere .05% could raise up to US$ 6661.1 billion.

See full report »

 


Climate change will mean lesser water availability for food production new FAO report warns
imageA comprehensive survey of existing literature points to the impacts that climate change will have on water used in agriculture. Those dependent on glacial melt water for irrigation will be heavily impacted; this covers 40% of the world’s population. The report, although issues a risk warning for both rural livelihoods and food security of city populations, states the rural poor will be the most vulnerable.

See full report »

 


South Asia and parts of Africa are amongst climate hotspots where food supplies will be worst hit
imageThe study which maps out regions based on sensitivity to and capacity to adapt to the impacts of shifts in temperature and precipitation highlights the South Asian region where millions of already-impoverished people will be further impacted due to loss in agricultural productivity.

See full report »