Is insurance the right tool to cover climate change-induced damage?

The ongoing UN climate summit is all set to launch “Clearing House for Risk Transfer”, an online platform that will work as a repository for information on insurance and risk transfer to facilitate efforts to develop ways to reduce losses and damage induced by climate change. To this end, the Executive Committee of the Warsaw International Mechanism on Loss and Damage (WIM) – which was established during the COP19 to address loss and damage caused by climate change – approved the draft of a five-year rolling work plan a few weeks ago. The website is scheduled to be launched in the second week of the summit – the 23rd Conference of the Parties (COP23), hosted by UN climate agency the United Nations Framework Convention on Climate Change (UNFCCC) in Bonn, Germany. The Clearing House for Risk Transfer is one of the provisions in the Paris Agreement adopted during COP21 in 2015. The plan focuses on insurance as one of the major instruments of minimising climate-induced losses and damage, which has many climate activists concerned. Harjeet Singh, global lead on climate change at ActionAid International, said the major instrument of reducing loss and damage was money, but regarding finance, the WIM plan avoids discussion as to where the new and additional money would be sourced from to mitigate the damage suffered by vulnerable countries. “We have to say that the plan is missing a major component, which is the fund. The WIM continues to focus on meetings, reports, submissions, and surveys – anything other than a concrete plan to provide financial support to the world’s most vulnerable communities to climate change impacts,” he added. Fiji, the presidency of COP23, the ongoing UN climate change conference, has identified loss and damage as one of the priorities this year as well. However, during the UN General Assembly in New York back in September, Fiji Prime Minister Frank Bainimarama spoke in favour of insurance as a vital instrument to cover for climate-induced losses. “Without insurance, restoration and rebuilding is simply too great a burden for many nations and communities,” he said. “We are pleased to be part of a serious engagement with governments and the private sector to secure innovative and more affordable access to insurance to enable those affected by disaster to recover more quickly. It is a question of fairness and economic development.” Considering Fiji’s stance on climate insurance, negotiators from a number of climate activist groups believe that COP had been pressured into promoting insurance by developed countries. One of the negotiators for an African country, requesting anonymity, said developed countries have been pushing for climate insurance as a major mechanism to address loss and damage, and by doing so, they are pushing for poor people from poor countries to pay for the insurance premiums from their limited resources. Julie-Anne Richards, manager of international policy at Australia-based Climate Justice Program, echoed the African negotiator in her concern. “The insurance mechanism is a clever initiative for developed countries to push the developing countries to pay for climate risk that they are not responsible for,” she said. However, she said there were chances that the Clearing House could become a useful tool for developing countries to identify where and how insurance might benefit them. “But it will not be acceptable if the developed countries use this plan to avoid raising new and additional money for climate victims,” she added. Furthermore, insurance may have a role in absorbing the shocks and stresses caused by climate change, but its feasibility for the very poor in developing countries remains distant and doubtful, said several green activists attending the climate summit. A Bangladeshi negotiator brought up the case of Bangladesh farmers, explaining why the insurance mechanism will not work in developing countries. “Generally, insurance means a person has to come under premium, which the poor farmers of Bangladesh cannot, or will not, accept. Initially, the plan is to subsidise the premium from the government’s safety net fund or other sources allotted for managing disasters,” the negotiator told the Dhaka Tribune. “But the victims of climate change have to provide an amount to consider the scheme as his/her own. Hundreds of thousands of poor, vulnerable farmers and fishermen in Bangladesh have been living hand to mouth and are totally dependent on their sole livelihood. They are unable and reluctant to pay any kind of premium, which is a burden on them,” the negotiator explained. The topic of loss and damage caused by climate change has been under the spotlight this year as erratic weather events have caused much losses in Bangladesh and many other countries across the world. In Bangladesh, unusual spells of incessant rainfall prior to the monsoon caused a flash flood in April which damaged vast stretches of paddy fields in Haor (wetland) areas in the country’s north-west region. The heavy rainfall, which the farmers were not expecting, submerged about 400,000 hectares of Boro paddy that were two weeks away from harvest, destroying about 2,000,000 tons of rice loss and creating an acute food shortage in the country. On the other side of the world, several natural disasters this year such as hurricanes Harvey, Irma and Ophelia have been similarly devastating.