Could micro-insurance help the poorest communities deal with climate change?

Bill Lascher in the Guardian (UK), on their Finance hub:... Dramatic storms like Haiyan may represent the new normal, which is partly why the global insurance industry and civil society organisations are turning to programmes such as MicroEnsure and the Coop Life Insurance and Mutual Benefit Services. These kind of insurance schemes linked to climate indices, are not to specific headline-grabbing catastrophes, but the ongoing damage global climate change is doing to rural economies.

Motivated by the chance to expand markets, cultivate corporate responsibility — or both — the world's largest re-insurers are partnering with non-governmental organisations and regional financial institutions to sell climate insurance coverage to the poorest populations in developing countries.

When satellites recorded drought conditions in Ethiopia last year, for example, more than 12,000 farmers received a total of $322,772 (£200,00) in payouts through the R4 Rural Resilience Initiative, one of the new crop of programmes combining "index insurance" with climate adaptation work in developing countries. It's a microscopic sum compared to the $4.6tn insurance industry, but a leap from the $17,000 R4 paid the previous year.

R4, a partnership between reinsurer Swiss Re, the UN World Food Programme (WFP) and Oxfam America, initially launched in Ethiopia's Tigray region and expanded to Senegal late last year. Instead of paying for specific losses policy-holders experience after a drought or storm, these new micro-insurance policies pay when satellites capable of sensing climate patterns hit pre-agreed triggers.

Individual farmers don't have to prove their losses. They pay into the system based on expectations of how drought will disrupt their harvests, and if rainfall dips below predetermined levels they're paid. Cash-strapped participants can pay for their premiums through labour contributing to local climate resilience efforts.

"Instead of rushing in after a catastrophe, (it's about) doing something to strengthen those populations and make them more resilient," Christina Ulardic, head of market development at Swiss Re Corporate Solutions, said. "Yes, insurance plays an important role in that programme, but it doesn't play the only role in that programme."...