Climate Change and Insurance: Disaster Risk Financing in by Eugene N. Gurenko

By Eugene N. Gurenko

Weather switch brings a few new set of significant fiscal dangers bobbing up from altering climate styles, severe climate occasions and emerging sea degrees. these such a lot in danger are constructing nations, who, regardless of substantial post-disaster donor relief, were bearing the most important brunt of disaster-related losses. One edition answer that's speedily gaining help of nations and overseas donors is a possibility move to the worldwide reinsurance and capital markets. This quantity, a unique factor of the magazine weather coverage, explores the function that insurance-based mechanisms can play in assisting those nations to arrange for weather switch. It bargains a special and accomplished viewpoint at the power position of coverage options in worldwide variation to weather switch.

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This is particularly important for covariant losses that impose a substantial risk of insolvency on small insurance pools. 4. Thoughts on a second tier of support As described above, a climate insurance programme for stochastic sudden- and slow-onset weather disasters, either through a climate insurance facility or other institutional arrangement, would not cover uninsurable risks or communities without access to insurance. In theory, all risks that can be reliably estimated and for which there is uncertainty with regard to their timing and consequences are insurable (Kunreuther, 1998); yet, in practice, insurance will not be offered for many types of catastrophic risks for reasons of both demand and supply.

2006), provides a second illustration of the types of disaster insurance schemes that could be supported by a climate insurance facility. Because of the covariant risk (raising the premiums due to costly back-up capital), disaster microinsurance is hardly affordable to low-income households or businesses without the kind of support recently institutionalized by Indian regulation and provided by donor organizations. This provides another example of how a climate insurance programme could support insurance in developing countries.

2000), and will contribute to making these systems accessible and affordable to the poor. Four cases of recent donor-supported insurance initiatives, with illustrative examples, are described below and serve to illustrate the possibilities for a climate insurance programme. 1. Assisting index-based insurance for crops and livelihoods More than 40% of farmers in developing countries face threats to their livelihoods from adverse weather (World Bank, 2005a). Weather risk destabilizes households and countries and creates food insecurity.

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