Page - 498 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

498 J.Linnerooth-Bayeret al. used to invest in risk-reduction activities (Wilcox 2014, see Box 21.3). This tool, requested byARCmember countries, offers an interesting approach to linking the risk transfer structureofARCtoclimateadaptationand risk reduction investment. Notwithstanding theparamount importanceof assessing risks tocountries in the poolandproviding timelypost-disaster funds, theregionalpoolshaveput intoplace very few explicit incentives or funds for reducing disaster risks. There are some requirementswith regard to usage of pay-outs and emergencymanagement, yet as shown in the case ofARC, there are no conditions for proven disaster and climate risk reductions. CCRIFhas a disaster riskmanagement function, but it focuses on reducing downstream losses after a disaster has occurred by providing immediate liquidity. Inpractice, then,beyondthedatacollectionandmodellingaspects(though only theARCprovides open source risk data), there is very little evidence that the regionalpools shapeDRRandclimateadaptationpolicy in theirmembercountries. To conclude, it appears thatmore canbedone to design regional sovereign risk poolsthatcontributetothepreventativeaspirationoftheWIM,althoughtheproposed ARCXCFoffers an interesting proposition for this purpose.Design reformof the poolsmightincludearequirementfordetailedcontingencyplansforpre-disasterrisk reductionand(inthecaseofCCRIFandPCRAFI)makingriskdataopensource.The implementationof theseplanscouldbemadea requisite for continuedmembership in thepool. 21.5 CurativeResponse:Does InsurancePromote theEquitableCompensationResponseTtheWIM? TheWIMextendsbeyondaspirations fordisaster risk reduction to includeclimate- attributedlossanddamagethatcannotbeeffectivelyreduced.Thishasraisedaspira- tionsespeciallyamonghighlyvulnerabledevelopingcountriesthataformof(legally non-binding) compensation for residual climate impactsmaybe in the offing. The question in this section iswhether insurance,byreimbursing lossanddamage from climatedisasters,contributestothe‘equitablecompensation’orcurativeaspirations for theWIM? At theoutset, it isworthemphasising thatfinancial instruments, including insur- ance, are not neutral as to how disaster costs are shared. Risk-based instruments that require premiums or payments from those in the insurance program can shift responsibilitytovulnerablehouseholdsandcommunitiesandawayfromsocial insti- tutionsthatmayhavepreviouslyaidedreconstruction; incontrast, informalorpublic mechanisms, like remittances or reserve funds, share losses usually across family members and taxpayers. For insurance programs, it should be asked if the insured, themselves,paytherisk-estimatedpremiumthusputtingthefullburdenontheirown at-risk communities (and at the same timeproviding incentives for them to reduce their risks).Alternatively, are there arrangements, like cross subsidies, that allocate this burdendifferentlywithin the riskpool, or are there arrangements, like transfer payments, that allocate theburdenat leastpartially to thoseoutside the riskpool?