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332 L.Schäfer et al. accurately estimate expected losses, a key condition of insurability is violated.” Kunreuther andMichel (2008) therefore conclude that only a requirement by law willmakeinsurersprovidecoverageforclimate-relatedrisk thathaveahighenough potential for causingcatastrophic losses in specificareas. BehaviouralFactors:WhyPeopleDon’t InsureAgainstBigRisks Ithasoftenbeenobservedthathomeownersdon’tpurchasedisasterinsurance.While budgetconstraintsareoneexplanationforthisbehaviour,anotherexplanationispeo- ple’stendencytounderstatetheprobabilityofarareeventsandcatastrophesforthem- selves.Kunreuther and Pauly (2004) could show that “people don’t insure against low-probability high-loss events evenwhen it is offered at favourable premiums.” Duetoapre-disaster“Itwillnothappentome”perception,peopledon’tfeeltheneed tovoluntarilypurchaseinsurancecoverage(Hertwigetal.2004).KouskyandCooke (2012) conclude that “homeowners, facingabudget constraint andaconstraint that their utilitywith insurance exceeds thatwithout it,mayfind the required loadings toohigh tomake insurancepurchaseanoptimaldecision.” 13.4.2 SevenPrinciples toDesignEffectivePro-poor InsuranceSolutions This chapter is basedon theobservation that poor andvulnerable people andcom- munitiesalreadyexist andpersist at theedgesofadaptation limits,operatingwithin adaptation frontiers.Tosuccessfullynavigateadaptation frontiers, thesepeopleand communities need tools that allow them to explore the frontier, stay away from adaptation limits and continuously move into safer domains. So far, this chapter establishedthat insurancecanbeusedasanavigational toolaroundadaptationfron- tiers,howeverhas limits thathave tobe taken intoaccountwhenapplying insurance instruments.Basedon thesefindings, thefinalpart of thechapter examines success criteriaforinstrumentslikeinsurancetoapproachtheirpotentialasriskmanagement tool indevelopingcountries. In describing these success criteria wemake use of an analysis of 18 existing insurance schemes with regard to success factors and challenges for climate risk insurance for the poor andvulnerable, conducted by a team from theMCII.Based onthisanalysis, theMCII teamdistilledsevenPro-PoorPrinciples forClimateRisk Insurance (Schäfer et al. 2016). The principles can aid decisionmakers and prac- titioners in reachingpoor andvulnerable peoplewith effective insurance solutions. They can guide the design process of new insurance schemes that target the poor andvulnerable inparticular by following the suggested stepsorhelpwith the iden- tification of existing insurance schemes to be supported by climate risk insurance initiatives.Additionally, theprinciplescanbeused tosupportclimate risk insurance practitioners in assessing and/or improving their current operations.Theprinciples aredescribed inBox13.2and furtherdiscussedbelow.