Page - 488 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

488 J.Linnerooth-Bayeret al. 21.2.3 SpectrumofExAnteandExPostFinancing Instruments Insurance isnot theonlymeasure toensurepost-disasterfinancial resources, and in some contexts othermechanisms can bemore appropriate and cost-effective. It is therefore important not to view insurance as a stand-alone solution but consider if andhowitcanbepartofaholisticclimateriskmanagementapproach. Incontrast to wealthycountries, insurancemechanismsforprovidingcatastrophecoverarestill in their infancyin thedevelopingworld.Thepercentageof lossesfromnaturalhazards covered by private or public insurance in 2014 in theUSandEuropewere 42 and 34%, respectively, compared to only 1.4% inAfrica and 12.5% inAsia (SwissRe 2015).Theextent towhich insurancecanbeoffered is riskandcountry-specificand dependentmainlyon income. Table21.1providesanoverviewoffinancial instrumentsandarrangementsavail- able tocoverdisaster risksfacing(i)households, farmsandsmallandmediumsized enterprises (SMEs) operating at the local ormicro scale, (ii) financial- and donor- organisationsoperatingat the intermediaryscale, and(iii)governmentsoperatingat thenationalormacroscale. Table21.1 Examplesof riskfinancingarrangementsatmicro, intermediaryandmacroscales Micro-scale Households/SMEs/Farms Intermediary-scale Insurers/financial institutions/donor organisations/NGOs/Agro- Businesses/Cooperatives Macro-scale Governments Insurance instru- ments Indemnity–based property, crop&life insurance, index-based (parametric)property, livestock&crop insurance,weather hedges, national insurance programs Indemnityandparametric insurance forNGOs, co-ops,Re-insurance for direct insuranceproviders, catastrophebonds, sidecars Sovereign risk transfer (e.g., sovereign re-insurance, catastrophe bonds, sidecars), contingent credit, regional catastrophe insurance pools Solidarity Government assistance, humanitarianaid Government guarantees/bail outs Bi-lateral andmulti-lateral assistance,EUsolidarity fund Savings andcredit Savings,micro-savings, micro-credit, fungible assets, foodstorage, money lenders Emergency liquidity funds Reserve funds, post-disaster credit Informal risk sharing Kinshipandothermutual arrangements, remittances Diversions fromother budgetedprograms SourceAdapted fromLinnerooth-Bayeret al. (2010)