Insurance only part of disaster resilience, says climate change panel

Guardian Development Network (UK): In most developing countries, farmers risk losing their crops and livestock to droughts or floods, and the recent intensity of these climatic shocks has been record-setting. As the losses from these events mount, the developing world has been turning to the experiences of richer nations in transferring risk through mechanisms such as insurance.

But experts – including the authoritative Intergovernmental Panel on Climate Change (IPCC) in its special report on managing the risks of extreme events and disasters to advance climate change adaptation (SRex) have sounded a note of caution in portraying insurance as a panacea for climatic shocks.

Even in the developed world, insurers are reluctant to provide regional or even nationwide coverage for floods and other natural hazards because of the systemic nature of those risks, the report pointed out. Globally, only about 20% of the losses from weather-related events were insured between 1980 and 2003, the report said. In some countries, such as the Netherlands, which is exposed to high flood risk, insurance is non-existent; the government provides compensation.

The SRex expressed only moderate confidence that disaster insurance mechanisms could increase resilience, Tom Mitchell, lead author and head of the climate change programme at the UK's Overseas Development Institute (ODI), said.

Mitchell wrote in a blogpost on the Climate and Development Knowledge Network that although the report says insurance "can help to finance relief, recovery and construction, reduce vulnerability, and provide knowledge and incentives for reducing risk", it also says "under certain conditions, such mechanisms can provide disincentives for reducing risk"....