Insurance Against Ravages Of Climate Change Needed
New Forms Of Insurance Against Ravages Of Climate Change Needed In Poor Nations - UN
New York, Nov 14 2006 11:00AM
Warning that by 2040 the world could witness a year in which losses from droughts, storms surges, hurricanes and floods hit $1 trillion, the United Nations Environment Programme (UNEP) today called for new kinds of insurance and financing, including public-private partnerships, to help developing countries adapt to climate change.
“Widespread insurance cover has been generally confined to developed countries where consumers, businesses and industry have in the past been able to pay for premiums,” UNEP said in launching its new report – “Adaptation and Vulnerability to Climate Change: The Role of the Finance Sector,” produced by its Finance Initiative (<"http://www.unepfi.org">UNEP FI) .
“However, the time has come to forge
public-private partnerships to bring new kinds of creative
financial instruments to developing countries where the
impacts of climate change are likely to hit hardest,” it
added, quoting insurers and banks.
“Otherwise,
the costs of coping with a rising tide of full scale,
climate-linked, natural disasters could outstrip current
levels of humanitarian aid putting increasing strain on
international aid budgets.”
The report, launched
during the final week of the UN Climate Convention in
Nairobi, Kenya, cites figures showing estimated overall
losses of nearly $13 billion from typhoons which struck
China, Japan and the Philippines just from July to September
this year.
In Africa, the ongoing drought and floods
in Ethiopia and Somalia have left some 280,000 people
homeless. Since 2005 the drought has affected an estimated 3
million people.
“It seems likely that there will be
a ‘peak year’ that will record losses of over $1
trillion before 2040,” the report says. “In fact, since
so much development is taking place in coastal zones, the
figure may arrive considerably before 2040.”
It
cites some promising initiatives already underway, including
one by the UN World Food Programme (WFP) that cover that
covered Ethiopian farmers during the March to October season
and was designed to pay out if rainfall fell below a key
threshold via a finance instrument known as a “weather
derivative.”
The pilot scheme, involving a UNEP FI
member called AXA, the World Bank and the United States
Government, was aimed at preventing communities spiralling
into chronic poverty and aid dependency due to drought.
Other projects are being examined to help pastoralists, with
payments triggered when the condition and availability of
forage for livestock deteriorate below a pre-determined
point.
The report also highlights how microfinance
institutions in India, working with the re-insurer Swiss Re,
are helping farmers in Andhra Pradesh use “weather
hedges” against lower than expected monsoon rains.
Community-wide cover of around $150,000 is in place for an
annual premium of just
$1,600.
Ends