COP23: Climate insurance not enough for loss and damage

Insurance initiatives for those vulnerable to climate change impacts is a move in the right direction, but more needs to done to account for the loss and damage suffered by communities
<p>Insurance cover for extreme weather events is becoming vital in the face of extensive damage [image by: Paduret Dan-Cristian]</p>

Insurance cover for extreme weather events is becoming vital in the face of extensive damage [image by: Paduret Dan-Cristian]

Two major global initiatives have been launched at the Bonn climate summit to provide insurance to millions of vulnerable people and increase the resilience of developing countries to the impacts of climate change.

The initiatives come on the heels of extreme weather events in 2017. Hurricanes, droughts and rising sea levels have devastated communities with increased frequency and intensity, and are estimated to have cost USD 200 billion in damages worldwide, .

The InsuResilience global partnership is a major scaling-up of an initiative started by the G7 group of nations in 2015 at COP21. It aims to meet the pledge of providing cover and support to 400 million vulnerable people by 2020. The partnership brings together G20 countries and the so-called V20 nations, a group of 49 of the most vulnerable countries including small islands such as Fiji, chair of COP23 in Bonn.

“The global partnership is a practical response to the needs of those who suffer loss because of climate change,” said Frank Bainimarama, prime minster of Fiji. The small island’s chairing of the climate talks has highlighted climate impacts, and climate insurance has been one of the major themes of discussion.

“This new and higher-ambition initiative represents one shining example of what can be delivered when progressive governments, civil society and the private sector join hands with creativity and determination to provide solutions,” said Patricia Espinosa, executive secretary of the UNFCCC.

Germany announced USD 125 million in support to the new global partnership, which follows the GBP 30 million (USD 39.5 million) commitment made by the UK in July via its Centre for Global Disaster Protection.

Clearing house for risk transfer

This week, the UNFCCC Executive Committee of the Warsaw International Mechanism for Loss and Damage also launched a clearing house for risk transfer – a repository of information on insurance and related subjects.

Climate insurance is one of the key strategies to better prepare countries for climate change. In Bonn, a growing number of member states planned to include insurance strategies in their efforts to achieve the goals of the Paris Agreement. However, international NGO ActionAid said that insurance is not a safety net for all.

“Insurance might turn out to be a piece of the puzzle, but we can’t pretend that it’s a safety net for everyone,” said Harjeet Singh, global lead on climate change for ActionAid International. “Insurance does sometimes help people who are impacted by floods or cyclones, but it won’t be an option for those facing certain losses. Private companies are unlikely to sell insurance to those facing rising sea levels.”

Singh was also critical of the clearinghouse. “All this fanfare about the clearinghouse is actually just about a matchmaking website that can help private companies meet more clients.”

It is also who will bear the costs of insurance premiums for the various global initiatives. “Will poor people in vulnerable countries, who have done nothing to cause the climate crisis and who bear the brunt of its impact, need to pay for climate insurance?” asked Singh. “On one hand, developed countries aren’t allowing UN climate talks to make any progress on the issue of climate finance. At the same time, they’re putting effort and money into initiatives that will mainly help private companies profit from selling insurance to the poor.”

There is an urgent need for creating financial products with social utility, Singh told “There are three major things to be considered while designing insurance products — affordability, feasibility, and fast claim settlement for people who are financially illiterate.”

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