Page - 506 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

506 J.Linnerooth-Bayeret al. nerablecountryaspirationsfortheWIM.Mutuality,however, isnotafeatureofmost donor-supportedmicro-insuranceand regional insurancepools. Achallengewith the solidarityprinciple, ifpremiumsaresubsidised, is the less- enedincentiveforpolicyholders toreducetheirrisk. Inmeetingthischallenge, inter- national financial institutions, development agencies andother donorswill need to reconcile the contending equity and preventative objectives in their support of cli- mateinsuranceprograms.Thisisforemostachallengeindesigning“smart”insurance programs that are considered equitable and at the same time provide incentives or directives to their clients to reduce risks. Twooftencitedsuccessstoriesforinsuranceinstrumentsservingthemostvulner- able theAfricanR4micro-insuranceprogramandtheAfricanRiskCapacity (ARC) regional insurancepool, goa longway incombining thesegoals.Neither is a com- mercialinsuranceenterprise;neitheris(fully)characterisedbyrisk-basedpremiums; andbotharehighlysubsidised.TheR4program’ssuccesshasbeenattributedinlarge part toitscloseconnectionwithpublicsafetynetprogramsintheparticipatingcoun- tries,andtheARCcanattributeitssuccesslargelytoitsrequireddisbursementplans. As evidenceof extremeclimate-attributed impacts and risks becomesmorewidely available andaccepted,ARC’s innovativeXCFprogrammayserveasaconduit for institutionalisingdonor support in the formof increasedpool capitalisation. The provision of support to regional insurance pools andmicro-insurance pro- grams continues to be framed as humanitarian aid, not invoking accountability or liability for climate-attributed loss anddamage. Indeed, support for insurance pro- gramshas comemainly fromdevelopment andfinancial organisations, such as the WorldBank, national development partners, and internationalNGOs,with empha- sis on thepotential role of insurance in supportingpoverty reduction in the face of climateanddisaster risks. Inotherwords, thenarrative for supporthasbeen framed asahumanitariananddevelopment issue. Theinsurancediscoursemay,however,bechanging.Thisisperhapsmostapparent indiscussionsontherecentG7InitiativeonClimateRiskInsurance(InsuResilience), whichhas theambitiousgoalof increasingaccess todirector indirectclimate insur- ance coverage for up to 400million of themost vulnerable people in developing countries by2020 (G72015; InsuResilience 2017).While InsuResilience does not officially commit to any specific equityprinciple, there are anumberof voices that raise this aspect.Oneexample is theMunichClimate Insurance Initiative (MCII), a close advisor to InsuResilience.MCII is forthright about the need togroundfinan- cial support in ethical claims of accountability and also capability. In thewords of thisNGO(whosemembersincludeinsurers,NGOsandresearchers), InsuResilience shouldprovide technicalandfinancial support to theset-upandmaintenanceof risk facilities and pools, the capitalisation of national and regional risk pools andother formsof co-financing premiums.This support should follow the principles of “ca- pability, including sharing the risks imposed by climate change and responsibility for climate change impacts” (Schäfer andWaters 2016).TheG7 initiative has thus unleashed a broad-ranging discussion onwho should pay for insurance, sovereign risk transfer andsocialprotectionsystems in lightofclimatechange. Inacommen-