Holmes says an insurance-based response should be explored. Since vulnerable people in places most likely to be affected by humanitarian disasters cannot afford insurance, donors could pay a small premium to insure them against extreme weather conditions. "It may be a more cost effective response than trying to raise money after the event."
…Insurance could provide cash to people in such situations automatically, Holmes said. "A hungry farmer who has lost his crops in a flood would need relief agencies for food, but if he has the money he doesn't have to depend on them." Three years ago the World Food Programme (WFP) signed a contract with global reinsurance company AXA RE for a pilot project in
The pilot was developed by the WFP and the World Bank Commodity Risk Management Group to test out insurance against widespread destruction that threatens 17 million farmers in case of drought. Payout would be triggered when rainfall from March to October falls below a given minimum. The project has not been tested because there has been no severe drought the past three years.
Finskas concedes that insurance might provide timely relief, but warns against the "stingy" practices of insurance companies. "If one continuously breaks his or her car, the insurance bonus quickly disappears. So if drought occurs repeatedly, insurance companies might refuse to underwrite the costs," she said.
Insurance managers agree. "Insurance is based on unforeseen risks, but if drought or floods occur frequently, then it is no longer unpredictable," Veli-Pekka Kemppinen, insurance manager at the Finnish insurance company IF told IPS. "Insurance cannot cover such events."
Finskas warns also that given dwindling aid budgets, donor governments might decide to pay low premiums rather than increase aid. Helping developing countries build capacities to respond to disaster – as done in
"Seasonal Flooding in Southern Africa", the Barotse flood plain, from NASA/Visible Earth, Credit: Jacques Descloitres, MODIS Rapid Response Team, NASA/GSFC, via Wikimedia Commons