Over 100 insurers call for greater action to adapt developing countries to climate change

Four initiatives representing more than 100 leading international insurance companies have called on governments worldwide to harness risk management techniques and insurance expertise to help developing countries adapt to climate change.

The four groups which launched the statement on the eve of an international, low-carbon investment conference convened by the UK government, are ClimateWise, The Geneva Association, the Munich Climate Insurance Initiative (MCII) and the United Nations Environment Programme Finance Initiative (UNEP FI), all of whose membership span across Africa, Asia, Europe, North and South America and Oceania.

Presenting a statement aimed at world leaders and negotiators of the United Nations Framework Convention on Climate Change (UNFCCC) at a press conference held in Lloyd’s of London, the call on governments was also significantly made less than 90 days before the next UN Climate Convention meeting scheduled to take place in Mexico.

The statement launched Monday underscored the view that risk management mechanisms are currently falling considerably short of their potential in delivering resilience benefits to the developing world.

Highlighting how governments can unlock significant potential to increase the protection and reduce the vulnerability of developing world populations and economies from natural disasters through better risk management and by enabling insurance-type approaches, the statement by the insurance initiatives also made other demands.

They called on governments to implement risk reduction measures already agreed at the 2005 World Conference on Disaster Reduction and provide a suitable enabling environment, including economic and regulatory frameworks, for risk management and insurance to function at all levels of society.

They further tasked governments worldwide to invest in reliable risk exposure data and make it freely available to the public, as well as act on lessons learned about the benefits of regional public-private partnerships and micro insurance schemes which reduce losses for climatic risks.

The statement also called on governments to formally recognise the potential role for insurance in the United Nations climate change negotiations, and to open channels for dialogue at a national level so that progress can be made immediately.

The groups argued that there is now an opportunity, given the current international negotiations under the UNFCCC, to firmly anchor insurance expertise and components into any global adaptation mechanism under the international climate-change regime.

They also stated that the recent floods in Pakistan, China and Niger are a timely reminder that the world must adapt to become more resilient to the long-lasting and significant changes in climatic conditions being experienced across the world.

According to them, these changes are likely to have the most damaging impacts on the developing world, where even small economic losses can have long-term effects on development, and where human health is generally less robust.

The four groups continued that whereas in the past three decades, direct global economic losses for all types of natural catastrophes have averaged US$90 billion per year, with 78% of those natural catastrophes being weather related, 85% of deaths associated with all natural catastrophes over that timescale have occurred in developing countries (Munich Re, 2010).

“There is enormous potential to be derived from a partnership-based approach to tackling the climatic risks faced by people and governments around the world. Indeed, several communities affected by climate change are already benefiting from projects that improve risk management and feature insurance elements,” they added.

Citing some examples they said that over 4500 Mongolian herders covered by a public-private index-insurance scheme are currently receiving indemnity payments totalling around US$1.4 million for cattle mortality losses caused by a particularly harsh winter, while in September 2008, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) – a public-private partnership – paid US$6.3 million to the Turks and Caicos Islands after Grand Turk was hit by Hurricane Ike.

The four initiatives also said as a number of realistic proposals have already been submitted, the priority now is for governments to reach agreement so that they can be implemented.

After the launch and press conference which was opened by Andrew Maskrey of the United Nations International Strategy for Disaster Reduction, with a keynote address, a high-level panel discussion led by senior insurance, government and NGO figures explored immediate next steps.

Andrew Torrance, Chairman of ClimateWise and CEO of Allianz Insurance, commented that “With climatic disasters inflicting more and more damage, the increasing reliance of governments on foreign aid alone is unsustainable.”

He stated further that “ As the global climate continues to warm, we have to find new ways to protect people and economies from the impacts of extreme weather, particularly those who are most vulnerable” and that. “Insurers have much to offer, but this potential can only be leveraged through a partnership approach with governments.”

“With over 100 of the world’s leading insurers standing ready to engage, the opportunity for partnership building is immense,” Andrew-Torrance opined.

On his part, Patrick M. Liedtke, Secretary General and Managing Director of The Geneva Association, said: “The core principle of risk management and loss prevention is that in most cases ‘prevention is better than cure’. If governments, especially in the developing world, can implement robust risk management and loss reduction measures, then a significant amount of both human suffering and economic loss could be prevented.”

Also, Professor Peter Hoeppe, Head of GeoRisks at Munich Re and Chairman of MCII said, “Developing countries are most vulnerable to climate extremes, even though they contribute little to greenhouse gases. These are precisely the areas which have the fewest tools to manage and transfer the risks they face and they often lack the financial resources to adapt to climate change.”

Commenting on the same issue, Achim Steiner, UN Under-Secretary-General and UNEP Executive Director, said: “The insurance industry is making it clear: it has the expertise and the creative solutions to assist vulnerable countries and communities manage the risks of climate change. But it is a partnership that works both ways.”

He added that “Governments need to act on this opportunity and harness this reservoir of risk assessment skills. Secondly, the insurance industry needs a fighting chance of success. In other words governments need to back big cuts in emissions in line with the scientific reality”.

By Edmund Smith-Asante

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