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494 J.Linnerooth-Bayeret al.
21.4 PreventativeResponse:Does InsuranceSupport
theRisk-ReductionResponse to theWIM?
Many analysts argue that insurance can go beyond enabling ex post relief, recon-
structionandrecovery,tobeanexante toolforpromotingriskreduction(Kunreuther
1996;KunreutherandMichel-Kerjan2009;Crichton2008;Botzen2013).According
to the chapter bySchäfer et al. (2018): “Insurance spurs transformationbyhelping
countries reshape theway risks aremanaged. It does sobyencouraging risk reduc-
tion,catalysingriskassessment,anddrivingmorestructureddecision-makingaround
ex-ante risk”.Despite these claims, somecommentators, includingNGOsandpar-
ties to theUNFCCC, remain sceptical that insurancegoesbeyond risk spreading to
risk reduction, andworry that insurance can even lead to a false sense of security
ormoral hazard if the insured, bynot bearing the full costs of riskydecisions, take
onmore risk (Vellinga et al. 2001;UNFCCC2008).Moral hazard iswidely recog-
nised, and insurers address it through the design of insurance products by using
deductibles or parametric products; however, questions remainwhether insurance
products lead directly to risk reduction.According to the Intergovernmental Panel
onClimateChange (IPCC), insurancecan“directlyprovide incentives for reducing
risk, yet theevidence isweakand thepresenceofmanycounteracting factorsoften
leads todisincentives…”(Chambweraet al. 2014).
BuildingonSurminski andEldridge (2015) andSurminski (2014),Lorant et al.
(forthcoming) identifyways inwhich the contractual elements andancillarymech-
anismsof insurance can (in concept) encourage risk reduction.After surveying the
developed-country practices of flood insurers, the authors note the disappointing
evidenceof a strong linkbetween insuranceandDRRandsuggestways that insur-
ers cancontributemoreeffectively, for example,makingbetteruseofhazardmaps,
monitoringhousehold risk improvements, rewarding riskmitigationwith premium
discounts, insertingconditionsorwarrantiesintocontracts,anddevelopingprotocols
thatwill better link risk inspections of large facilitieswith underwriting practices.
Beyond these design changes, there is evidence that public insurers invest more
inpreventative risk reduction than their private insurer counterparts (Schwarze and
Croonenbroeck2017;Ungern-Sternberg1996).Theevidenceontheinsurance-DRR
linkfortheon-goingworkundertheWIMisthatindemnity-based insuranceasprac-
ticedinwealthycountriesmayneedadaptingif it is tobeappliedasan instrument to
foster reductionof loss anddamage indeveloping countries.A similar conclusion
was reachedby the IPCC,whereauthorsconfirmed that risk-financingmechanisms
contribute to increasing resilience, but thatmajor design changeswouldbeneeded
to avoidprovidingdisincentives forDRR(Chambwera et al. 2014).Aswewitness
inwealthy countries, progresswill be slowand patchywithout public and private
commitment to shaping insurance systems such that they foster practices that lead
to investment indisaster risk reductionpractices.
Loss and Damage from Climate Change
Concepts, Methods and Policy Options
- Titel
- Loss and Damage from Climate Change
- Untertitel
- Concepts, Methods and Policy Options
- Autoren
- Reinhard Mechler
- Laurens M. Bouwer
- Thomas Schinko
- Swenja Surminski
- JoAnne Linnerooth-Bayer
- Verlag
- Springer Open
- Datum
- 2019
- Sprache
- englisch
- Lizenz
- CC BY 4.0
- ISBN
- 978-3-319-72026-5
- Abmessungen
- 16.0 x 24.0 cm
- Seiten
- 580
- Schlagwörter
- Environment, Climate change, Environmental law, Environmental policy, Risk management
- Kategorien
- International
- Naturwissenschaften Umwelt und Klima