Page - 507 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

21 InsuranceasaResponse toLossandDamage? 507 taryinNatureClimateChange,Surminskiandcolleagues(2016)explicitlyraisethis issue: As the intensity and frequencyof climateextremes increase, is it fair to shift responsibility on to thosewhoare the least responsible for climate change, the least able to shoulder the premiums, and inmanycases the least able to reduce their losses? AstherecentG20/V20GlobalPartnershiponInsuResilience(launchedatCOP23) shows, the need for donor support is increasingly accepted by the development finance community. Importantly, this financial support should be ‘smart’, under- stood as reliable, flexible,minimise incentive distortions, andmake the recipients aware of the true cost of the covered risk (Schäfer andWaters 2016). In thisway, subsidised insurance can be linked to risk reduction (Hill et al. 2014; Vivid Eco- nomics et al. 2016).As a concrete proposal,Kunreuther andMichel-Kerjan (2009) havearguedthat thesubsidyshouldtaketheformofaninsurancevouchersothat the recipient isawareoftheunsubsidisedpremium.Inaddition,donorsupportshouldbe conditional by requiring contingency and disbursement plans (Schäfer andWaters 2016;Surminski et al. 2016).Asuggestion recently iteratedbySchäfer andWaters (2016) is that smart premium support should cover only part of the premium, for example, only themarkup (the risk and expense loads)while the beneficiary pays just theactuarial fairvalueorpurepremium. The message this chapter holds for the L&D discussions is to advise caution about relyingon themarket, alone, toprovide insurancefor fulfillingaspirations for theWIM, and to recognise the criticality of international and public intervention in climate insuranceprovision. Interventions can include subsidies, technical assis- tance,capitalisationof insuranceprograms,provisionofreinsuranceandother types of support that make insurance affordable to resource-poor and climate-sensitive clients; interventionscanalsoenable regulatoryregimesandpublic-privatearrange- ments thatexploit thepotential for insurancetogenuinelycatalyseriskreductionfar beyondwhathasbeenaccomplishedbycommercial insurers thus far. It is therefore important tocontinuedeveloping“smart” regionalornationalprograms thatexplic- itly combine insurancewith loss prevention and that address the emerging equity issues as climate change impacts the most vulnerable and least responsible. The WIMExecutiveCommittee continues to contemplate subsidies for pro-poor insur- anceprograms (ExecutiveCommittee to theWIM2016), ameasure thatwill grow in importance if the insurance narrative continues to evolve from solidarity-based humanitarianassistance toaccountability for climate-attributed impacts. References AllianceofSmall IslandStates (AOSIS) (2008)Proposal to theAWG-LCAmulti-windowmecha- nismtoaddress lossanddamage fromclimatechange impacts ArentDJ,TolRSJ,FaustE,HellaJP,KumarS,StrzepekKM,TóthFL,YanD(2014)Keyeconomic sectorsandservices. In:FieldCB,BarrosVR,DokkenDJ,MachKJ,MastrandreaMD,BilirTE, ChatterjeeM,EbiKL,EstradaYO,GenovaRC,GirmaB,KisselES,LevyAN,MacCrackenS,