Page - 326 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

326 L.Schäfer et al. premium instead of risking unmanageable costs due to disaster losses. These pre- dictable costs and the security of a payout in case of a disaster create a space of certaintyandallowforlonger-termplanning, investmentanddevelopmentactivities. Thereby, insurancecanincentivise“positiverisk taking”(MobarakandRosenzweig 2013),which is essential for innovation andgrowth.There arefirst indications that at themicro level, insurancecanhelp tounlockopportunitiesandmayhelp increase savings, increase investments in higher-return activities and improve creditworthi- ness (seee.g. Jensenetal.2015;Caietal.2015;Madajewiczetal.2013;Luxbacher andGoodland2010).At themacro level, researchsuggests that insurancemaycon- tribute toeconomicgrowthbyallowingformoreeffective riskmanagement (Lester 2014;vonPeter et al. 2012;MeleckyandRaddatz2011). Wealso see that theway risks are currentlymanaged in developing countries is often not effective. Themainly ex-post riskmanagement strategies are not timely and can lead to financial burdens aswell as volatility and uncertainty in decision- making.Theycanultimately threaten the resilienceof poor andvulnerable people, (re-)enforce poverty cycles and impede sustainable development. At the political levelwefind indications that insurancecouldhelp countries to reshape theways in which risks aremanaged ex-ante. This can be facilitated by eligibility criteria that insurancecompaniescandefineasapreconditionforpeopleandcountrieswantingto purchasetheirproducts.Thesecriteriacanfostertheselectionofnationallyappropri- ate risk reductionpriorities, andhelpdevelopacultureofpreventionandresilience. Forexample,wefind indications that requestingcontingencyplanningaseligibility criteria for theARChas influenced theprocessofdisaster reliefprogrammes in the relevant countries, shifting paradigms away fromcrisis to riskmanagement. ARC MemberStatescurrentlypayinsurancepremiumsthroughnationalbudgetprocesses and receive payouts only for pre-approved contingencyplans.Before the countries are allowed tobuyARCinsurancepolicies, theyhave to submit contingencyplans, defininghowthemoneywillbeusedincaseofapayout.ARCsupports thecountries indeveloping thecontingencyplanswith in-countrycapacity-buildingprogrammes (ARC2015).Byproviding incentives forgovernments to invest in their emergency planning and response capacities, ARC could contribute to shaping a culture of data-driven, prevention-focused riskmanagement in theirmember countries in the long-term. However, we have to be cautious about drawing conclusions from these first indications both atmicro andmacro levels. Evidencewith regard to the impact of insurance is scarceasmost schemesarestill in theirearlystagesof implementation. Sofar,mostof theresearchisbasedonsmallcasenumbers, thecasesandtheresults beinghighlycontext specific.Constantanalysisand long-termmonitoringandeval- uationofprojectoutcomeswill becrucial to trackpotential impactsof insurance in theyears tocome.Wealsoneed tonote that inall of thecasesexamined, itwasnot insurance alone but the interplay of insurancewith other riskmanagement activi- ties and social protection tools that improved opportunities and created incentives. Without this relationship, supporting investment inhigher-riskactivitiesmight also lead tomaladaptation by encouraging people to undertake activities that should be avoided when considering longer-term climatic impacts. This “false sense of