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504 J.Linnerooth-Bayeret al.
21.6 Summary:TheEvolvingInsuranceNarrative
This chapter has asked whether insurance instruments, and particularly micro-
insurance and regional insurance pools, can serve as a risk-reducing and equi-
tablecompensatoryresponsetoclimate-attributedlossesanddamagesfromweather
extremes occurring in developing countries, and consequently if insurance instru-
mentscanservethepreventativeandcurativetargetsoftheWIMandtheParisAgree-
ment?Asbackground, thechapter recognises that insurance,bydealingexclusively
with residual, sudden-onset event risks, canbeonlyonepartof theL&Dresponse.
The discussion has emphasised the substantial benefits of bothmicro-insurance
programsandregional insurancepools:micro-insurance forprovidingpost-disaster
relief and reconstruction andalsopre-disaster security (so important for adaptation
and escaping poverty); regional insurance pools for decreasing the costs of rein-
surance for governments and enabling early disbursement of emergency relief that
saves lives, reducesdistressedproductiveasset sales andmitigatesdisaster-induced
poverty traps.Thediscussionhasalsoemphasised thesignificantcostsof insurance,
noting that insured households and governmentswill on average pay considerably
more for climate insurance than theyexpect to lose fromextremeclimateevents.
Notwithstanding the benefits and costs, the discussion has examined insurance
instruments for their role inmeeting the curative and preventative aspirations for
theWIM—equitablycompensatingforresidualclimate-attributedimpactsproviding
strongincentivesordirectivesforreducingrisks.Amainmessagefromthisdiscussion
is thatabsent significant intervention in theirdesignandimplementation, insurance
mechanisms as currently implemented will likely fall short of fully meetingWIM
aspirationsas (differently) expressedbydevelopedanddevelopingcountryParties.
Thismessage is detailed in Table 21.3, which provides themechanisms bywhich
insurancecan inprinciple supportWIMresponses.
Recent experience shows that with some important exceptions indemnity and
parametric programs (mainly public-private partnerships), beyond pricing risk and
reducingmoral hazard, have fewexplicit incentivesor requirements for risk reduc-
tion,eveniftheirpotentialispromising.Reforminginsuranceprogramsforimproved
loss reduction can build on recent successful experiences, particularly evidence of
significant risk-reduction activities on thepart of public insurers compared to their
private insurer counterparts, and innovations and developments in risk pricing and
engineering,alongwithmoretargeteduseoflimits,deductiblesandwarranties.Still,
aswewitness inwealthycountries,progresswillbeslowandpatchywithoutpublic
andprivatecommitment toshapinginsurancesystemssuchthat theyfosterpractices
that lead to investment indisaster risk reductionpractices.
AsimilarmessageemergesregardingthecurativeaspirationsfortheWIM.Insur-
ancebasedontheprincipleofmutuality(typicallyprivate,market-basedinsurance),
unless subsidised or otherwise supported, does not share risk beyond the at-risk
insuredcommunity.Thereis thusnoreimbursementof losses tothevictimsofdisas-
ters(onaverage)outsideofwhatpolicyholders, themselves,contribute inpremiums,
whichdisqualifiesmutuality-based insuranceasacurativemechanismmeetingvul-
Loss and Damage from Climate Change
Concepts, Methods and Policy Options
- Title
- Loss and Damage from Climate Change
- Subtitle
- Concepts, Methods and Policy Options
- Authors
- Reinhard Mechler
- Laurens M. Bouwer
- Thomas Schinko
- Swenja Surminski
- JoAnne Linnerooth-Bayer
- Publisher
- Springer Open
- Date
- 2019
- Language
- English
- License
- CC BY 4.0
- ISBN
- 978-3-319-72026-5
- Size
- 16.0 x 24.0 cm
- Pages
- 580
- Keywords
- Environment, Climate change, Environmental law, Environmental policy, Risk management
- Categories
- International
- Naturwissenschaften Umwelt und Klima