Page - 336 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

336 L.Schäfer et al. infrastructure are essential for effective and efficient design and implementation as well as for ensuring theuptake,distributionandpayoutof insuranceproducts. 13.5 Conclusions Inthischapterweestablishedthatthepotentialcontributionofinsuranceasanaviga- tional tool aroundadaptation frontiers canbeconceptualised around threedifferent ways:First, throughfacilitating theexplorationofadaptation frontiersbycontribut- ing toa framework for signalling themagnitude, location, andexposure toclimate- related risks andproviding signalswhenadaptation limits are approached.Second, by supporting actors inmoving away from adaptation limits by incentivising risk reduction and creating a space for climate-resilient development. Third, by aiding actorsinremaininginthetolerableriskspacebyfacilitatingfinancialbufferingaspart ofcontingencyapproaches.Theconceptualdebatearoundadaptation frontiers—in- cludinglimitstoadaptation—hasbeenconnectedtotheUNFCCCLossandDamage discussionsboth inpolitical andacademic terms (e.g.Dowet al. 2013b).Given the potential contribution that insuranceoffers, thiscalls foracomprehensive reflection of insurance as part of theLoss andDamage policy space. Enhancing the interna- tionalcooperationaroundtheaspectof insuranceasaclimate riskmanagement tool would allow tomove forward several important aspects of the L&Ddebate, even in the absence of consensus around the different political stands of Parties e.g. the distributive and compensatory justice considerations of increasing climate impacts (Schinkoet al. 2018 in thisbook). We see, however, that insurance in market terms against the risks of climate change possesses several limitations. Among others these are limited insurability against someclimate risks, the inability to cover events ona full loss basis, afford- ability issuesasclimatechange impactsdrive lossexpectations.Moreover, reduced insurance demand can be a result of clients discounting rare events psychologi- cally.We therefore suggest theembeddingof insurance inacomprehensiveclimate riskmanagement approach accompanied by other risk reduction andmanagement strategies askeyprinciple for any international cooperation approach to respond to climate change impacts.Moreover, client value, the accessibility, affordability and sustainabilityofproducts,participationandtransparency,aswellasanaccommodat- ing enabling environment are key principles described in this chapter.Wepropose that risk transfer instruments like insuranceneed tocomplywith theseprinciples in order toapproach theirpotential asnavigational toolaroundadaptation frontiers for developingcountries.