Page - 500 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

500 J.Linnerooth-Bayeret al. Box21.2Threeequityprinciples fororganising insurance Mutuality Mutuality is at the core of the insurance concept, according towhich the insuredpar- ticipate inadisasterpoolaccording to their riskclass (andpaya risk-basedpremium). Thepool thenpaysthoseinsuredinaccordancewiththescaleof their losses.Mutuality is the primary principle underlying private,market-based insurance; clients enter the pool usually voluntarily, andpay according to the best estimate of the risk theybring with them.While insured agents receive payments from the pool depending on their losses, in the long run (andonaverage) theypay their own reimbursement, andmore, since thepremiumisbasedonexpected lossplus theadditional insurance loadsshown inFig.21.2.Accordingto thisprinciple, therearenotransferpaymentswithin thepool or fromoutside thepool (Wilkie1997). Solidarity Solidarity is a profoundly different concept in that losses are paid according to need, and contributions to the pool are notmade fully in accordancewith the risks that the applicantsbringwiththem,butperhapspartlyaccordingtoabilitytopay,orjustequally. Solidarity can result fromcross subsidies among those in thepool. It canalso take the form of payments by those not in the pool, for example, aid agencies can subsidise micro-insurance schemes. Importantly, solidarity is basedon theconcept ofvoluntary transfers for humanitarianor other grounds; there is nounderlyingnotionof liability. Theconceptofsolidaritythuscorrespondstotheconceptofdistributivejusticediscussed inWallimann-Helmeret al. (2018). Accountability Accountability as a concept differentiates itself from the solidarity principle in one important aspect; here, it is motivated by a perceived ethical or legal obligation for compensating thoseexperiencingclimate-attributed lossesanddamages.Accountabil- ity links an actor’s actions with outcomes, either causally or legally (Honoré 2010) where theallocationof responsibility isbasedoncausationand (oftenbutnot always) fault or negligence.Being accountable not onlymeans being responsible for climate- attributed impacts and risksbut alsoultimatelybeinganswerable for them. A farmore controversial and potent principle to underlie support for insurance instruments isaccountability for lossanddamage,whichmirrors the“polluter-pays principle” that is invokedacrossmanyenvironmental issues.Accountability invokes questionsof attribution (Jameset al. 2018) aswell as somedegreeof culpabilityor fault.Bothcanbedifficult toassign tostateandotheractors since thescience isnot sufficientlyprecisetoestimateincreasedriskoflossesanddamagesduetoemissions of greenhouse gases, and fault for emissions can be questioned due to historical knowledge and other factors (Burkett 2014). The assignment of accountability for lossesanddamages, andultimately responsibility,hasbeenunderstandably resisted becauseof fearsof legal liability. Indeed, theParisAgreementexplicitly rejects that the treatyprovideabasis for liabilityorcompensation(SimlingerandMayer2018). Yet, asLees (2016) argues, the refusal to contemplate liability shouldnot lead to a refusal tocontemplate theallocationofethical responsibility—whatherefers toasa responsibilityallocationmechanism.Indeed,recognitionofethicalresponsibility,as