A session of the Seminar on sustainable development and environmental economics
By providing financial security against droughts, floods, tropical cyclones and other forms of weather variability and extremes, insurance instruments present an opportunity for developing countries in their concurrent efforts to reduce poverty and adapt to climate change. Yet, the cost of providing catastrophe insurance is often prohibitive to the poor. Examining the costs, benefits and risks of public-private risk-financing programs, offers insights on the effectiveness of insurance as a mechanism for providing economic security to vulnerable communities and governments. Insurance mechanisms are of particular interest to climate negotiators seeking strategies for vulnerable countries to adapt to increasing severity and frequency of weather disasters.
Dr. Koko Warner presents a proposal for a two-pillar (prevention and insurance) international risk-management module that would be financed as part of a climate change financial mechanism agreed in Copenhagen in 2009 – a proposal recently been put forward by the Munich Climate Insurance Initiative (MCII). This proposal calls for international solidarity for very low probability and high consequence weather-related events (high risk layer) affecting vulnerable countries. For middle-layer risks it calls for international support to promote sustainable, affordable and incentive-compatible insurance programs that serve the poor without crowding out private sector involvement.
