Insurance industry 'should be forced to insure those at climate risk'

Brad Allen at edie.net: The insurance industry should be forced to protect citizens at risk from climate change, a new report from the University of Cambridge's Institute for Sustainability Leadership (CISL) has claimed.

The report, titled Insurance regulation for sustainable development, analysed the role of the insurance industry in protecting societies against climate risk. It found that, as well as providing financial protection, insurers could encourage people to better protect themselves from climate risks through incentives in insurance contracts.

The industry also has a unique expertise in identifying and mitigating risk, argued the report, while the global nature of insurance markets would help to spread the financial impact of climate disasters, especially for poor regions. As a result, the report urges policy makers to “utilize insurance regulation as an essential policy instrument to protect populations and assets from climate risks”.

Put simply, lead author of the study Dr Ana Gonzalez Pelaez argues that as many people as possible need to have access to insurance. Gonzalez Palaez will present her findings at the United Nations Third Financing for Development Conference this week in Addis Ababa. Commenting on the launch of her report, Gonzalez Palaez said: “Insurance should receive higher emphasis to ensure delivery on various policy commitments across the Post 2015 agenda....

Cyclone damage in South Townsville, Australia, shot by Rob and Stephanie Levy, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license 

'Once in generation' chance to reform climate insurance

Mark KInver at BBC: Policymakers have a "once in a generation" chance to reform insurance to help those most at risk from climate change impacts, say researchers.

A Cambridge University team is calling for insurance reforms to be explicitly mentioned in the UN's forthcoming Sustainable Development Goals. They outlined their proposals at an insurance summit at the UN, New York.

G7 leaders recently pledged to help 400 million people have access to insurance cover against extreme weather events. The researchers produced a policy brief that was presented to the global gathering at the UN headquarters.

"My role was to highlight the policy implications of having insurance at the centre of requirements to protect exposed populations," explained policy-brief author Ana Gonzalez Peleaz, a fellow from the Cambridge Institute for Sustainability Leadership.

"The lack of effective insurance regulation is a problem for accessing insurance across all parts of society." For example, she told BBC News, there were a number of nations that did not allow mutual insurance companies - these are companies that are wholly owned by policyholders, with the sole purpose of providing cover for its members and policyholders.

"The lack of regulation can have devastating consequences for customer protection and also insurers cannot really grow if the regulatory environment is not supportive."...

NOAA image of a tropical cyclone's eyewall 

Super storm lashes Australian east coast for third day

Reuters: A cyclonic storm lashed Australia's east coast for a third day on Wednesday, causing millions of dollars of damage to property and infrastructure in Sydney and other cities. Three people have been killed in the wild weather, which has washed away houses, cut power to more than 200,000 homes and stranded a cruise ship off the coast in mountainous seas.

The Bureau of Meteorology warned that a second storm cell was gathering off the coast north of Sydney, with gale force winds of up to 100 km per hour (62 miles per hour) and heavy winds lashing the coast.

The storm caused havoc in Sydney, felling trees, downing power lines and knocking out traffic lights. Delayed and canceled transport services due to flooding and strong winds left many commuters stranded in the wet.

New South Wales State Premier Mike Baird urged Sydneysiders to delay unnecessary travel and avoid traveling during peak times if possible. "There is no doubt this is a very severe storm event, indeed it is a once in 10-year event," Baird told reporters.

The Insurance Council of Australia said more than 7,500 insurance claims had been lodged. NSW State Emergency Service deputy commissioner Steve Pearce said damage costs were already in the millions and were expected to rise....

Sydney Harbor in better weather, shot by Andy, Wikimedia Commons via Flickr, under the Creative Commons Attribution-Share Alike 2.0 Generic license

Windstorm Niklas to cost German insurers 750 million euros

Reuters: German insurers are likely to face damage claims of around 750 million euros ($808 million) from windstorm "Niklas", which struck the country on March 31, insurance trade body GDV said on Monday.

That would make Niklas, which entailed wind speeds of up to 192 kilometers (119 miles) per hour, one of the five most costly storms to hit the country in the last 15 years, the GDV said of its estimate, which is preliminary.

Germany's third-largest insurer Talanx on Monday said it had penciled in a cost in the low double-digit million euro range from the storm and said this did not include claims faced by its subsidiary, reinsurer Hannover Re....

Vitter: Obama's Climate agenda threatens flood insurance prices for Louisianians

We can expect to see more of this. From Insurance News Net: Today, Sen. David Vitter (R-La.), Chairman of the Small Business & Entrepreneurship Committee, sent a letter to President Barack Obama, regarding the Administration's recent efforts to develop expansive new federal floodplain management standards based on preconceptions in the President's Climate Action Plan. The Obama standards could drastically change floodplain maps, which would inevitably affect flood insurance rates.

"Before President Obama begins to meddle with floodplain standards, we need an open dialogue with those directly impacted by flooding and infrastructure development," said Vitter. "The worst part - the Administration's plans could unnecessarily drive up flood insurance rates on small businesses and others across Louisiana who rely on affordable flood insurance, as well as increase the costs to other funded infrastructure projects."

Vitter has extensively fought to lower flood insurance prices. Last year, Vitter helped pass a flood insurance fix bill to protect against unaffordable rate increases. He's also been working to get the Federal Emergency Management Agency (FEMA) to reduce administrative costs of the National Flood Insurance Program (NFIP) and to increase participation in the program. According to the NFIB, nearly 40% of small businesses remain closed following a flooding disaster.

Last year, Vitter led efforts to pass the Water Resources and Reform Development Act (WRRDA) into law. As the lead Senate Republican on the conference committee who negotiated the final legislation, Vitter ensured that the bill included improved funding mechanisms to assist with flood control. In recent years, Vitter has also secured funding for flood control measures in Louisiana, enabling local officials to make key infrastructure improvements to better protect Louisianians....

Image from a 1973 flood in Pierre Part, Louisiana. National Archives photo

Going with the flow

A press release from the University of California-Santa Barbara: Millions of Americans live in flood-prone areas. In 2012 alone, the cost of direct flood damage hit nearly half a billion dollars. However, because the factors contributing to flood risk are not fully understood, river basin management — and even the calculation of flood insurance premiums — may be misguided.

A new study by UC Santa Barbara’s Michael Singer and colleagues presents a paradigm shift in flood hazard analysis that could change the way such risk is assessed in the future. The results are published in the journal Geophysical Research Letters.

Existing analyses attribute flood hazard to how often high water flows occur. They don’t, however, take into account the ability of river channels to accommodate them. The researchers present a novel method that compares the effects of channel capacity and stream flow on flood hazard frequency. They also document how flood hazard has changed over time in more than 400 streams across the United States.

“Our results demonstrate that changes in river channel boundaries directly impact flood hazard trends across the U.S.,” said Singer, an associate researcher at UCSB’s Earth Research Institute. “We show that in order to accurately calculate flood hazard and insurance premiums for river basins, channel capacity needs to be considered jointly with stream flow.”

...The findings revealed that important trends in channel morphology through time were three times more common than those related to water quantity, indicating that changes in the channel’s geometry tend to offset increases in water flow. “That raised alarm bells,” Singer said. “It suggests that a lot of areas that we might not have considered to have trends in flood risk actually do.”...

Red represents increases and blue decreases in flood hazard frequency. Deeper colors indicate sites with statistically significant trends. Image from the UC Santa Barbara website

Drought triggers insurance payout in Sahel ahead of humanitarian aid

Business Ghana: ARC Insurance Company Limited (ARC Ltd) will pay US $25 million in drought insurance claims to three countries in the Sahel this month. Mauritania, Niger and Senegal, which paid a combined premium of US $8 million, will use the payout to mobilize early interventions in response to drought; based on pre-approved contingency plans.

The catastrophe insurance model was developed specifically for unique African climate issues by the African Risk Capacity (ARC), a Specialized Agency of the African Union, and its affiliated mutual insurance company, ARC Ltd. The inaugural pool was set up in 2014 to help Member States build resilience to extreme weather events and protect food insecure populations. Coverage for tropical cyclones and floods will be available in 2016.

"This African-owned approach is addressing specific country-level climate change concerns, decreasing reliance on external aid, and promoting a sustainable solution to one of our continent's biggest challenges." said Dr. Ngozi Okonjo-Iweala, Nigeria's Minister of Finance and Chair of ARC's Governing Board.

By purchasing parametric drought insurance policies last year, Kenya, Mauritania, Niger and Senegal became the first African countries to embrace this new model of innovative funding, taking a major step in transforming the disaster response paradigm on the continent

Robert Piper, the UN regional humanitarian coordinator for the Sahel, acknowledged."These first payouts by ARC represent a milestone in Government leadership and financial innovation for emergency response across the Sahel. ARC's information and action is spearheading what will be a substantial global emergency response over the coming months to mitigate what could otherwise become a major food security crisis."...

Harmattan dust obscures the harbor at Saint-Louis, Senegal, a few miles from the Mauritanian southern border. This sort of weather is common in the Sahel climatic zone in December. Photo taken at about 4 p.m. in the afternoon. Shot by T.K. Naliaka, Wikimedia Commons,  under the Creative Commons Attribution-Share Alike 4.0 International license

First-of-its-kind report ranks US insurance companies on climate change responses

A press release from Ceres: Amid growing evidence that climate change is having wide-ranging global impacts that will worsen in the years ahead, a new report from Ceres ranks the nation's 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks. The report found strong leadership among fewer than a dozen companies but generally poor responses among the vast majority.

The report, Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations, ranks property & casualty, health and life & annuity insurers that represent about 87 percent of the total US insurance market. The companies were ranked on a half-dozen climate related indicators, including governance, risk management, investment strategies, greenhouse gas management and public engagement (such as their climate policy positions.) The report is based on company disclosures last year in response to a climate risk survey developed by the National Association of Insurance Commissioners (NAIC).

“Despite being on the 'front line' of climate risks, most of the company responses show a profound lack of preparedness in addressing climate-related risks and opportunities,” said Mindy Lubber, president of Ceres, a nonprofit sustainability advocacy group. “A big positive in the report's findings is the strong leadership among a small number of property & casualty insurers – a trend that needs to become far more mainstream if the industry is to accelerate global responses to this colossal threat.”

The companies were ranked on a four-tier scoring system, based on a 100-point scale, that included "Leading," "Developing," "Beginning" and "Minimal" grades. Nine of the 330 companies – three percent overall – received the “Leading” rank, including ACE, Munich Re, Swiss Re, Allianz, Prudential, XL Group, The Hartford, Sompo Japan and Zurich. The Hartford and Prudential are the only U.S.-headquartered insurers among the nine firms.

The vast majority of the insurers – 276 of the 330 companies – earned “Beginning” or “Minimal” ratings. The heath and life & annuity insurers had especially weak responses, with 89 percent and 80 percent, respectively, receiving the lowest “Minimal” rating....

“As key regulators of this sector, we strongly encourage insurance industry leaders and investors who own these companies to take this challenge far more seriously,” said Washington Insurance Commissioner Mike Kreidler, who wrote the report foreword and chairs the NAIC’s Climate Change and Global Warming Working Group. “The insurance industry is uniquely positioned as the bearer of risk to make adjustments now to lessen dramatic impacts we know are coming. This is not a partisan issue, it’s a financial solvency issue and a consumer protection issue.”

The 2007 flooding of the Kishwaukee River in DeKalb, Illinois, shot by IvoShandor, Wikimedia Commons, under the Creative Commons 3.0 license

View on Private Sector: Insuring against climate change

Aamna Modhin in SciDev.net: A recent UN report said that global warming will cause trillions of dollars of damage to coral reefs in the Caribbean. It also warned that small island states will be disproportionally affected by the impact of climate change: their coral reefs, which their economies depend on, are under significant environmental stress.

One news report on the document noted that the insurance industry could play a role in safeguarding such nations’ economies by providing stronger theoretical frameworks in which to understand risks to reefs.

I asked Mike Maran, chief science officer at insurance firm Catlin Group, what such efforts might look like. He tells me the firm is sponsoring a global scientific survey of coral reefs, including some in the Caribbean, with the aim of monitoring their health over the coming years.

Why would an insurance company do such a thing? Maran explains that scientific evidence helps insurers understand what might happen to reefs in the future, and how fast. Although firms do not insure the reefs directly, Maran says they have a broad obligation to study the risks society will face in the future so as to understand and manage those risks. The collection of robust scient
ific information gives insurers a good understanding of how the planet is changing and the impact these changes will have on policyholders.

Many of the risks involved in policies firms do provide — for example insurance for homes, other properties and businesses — could be linked to climate change, and so understanding changes to reefs as a proxy measure of that will help quantify those risks. For example, reef degradation could have an impact on fishing or tourism industries and so indirectly change the value of insured assets....

A coral reef in Biscayne National Park in Florida, shot by a Park Service employee

Drop in disaster payouts strengthens case for reinsurance price cut

Josh Franklin and David Goodman in Reuters: Payouts by insurers for disaster claims in the first six months of the year were below the average for the past 10 years, a study showed on Wednesday, which is likely to bolster insurers' calls for cheaper reinsurance.

The global insurance industry covered $21 billion in losses from natural catastrophes and man-made disasters in the first half of the year, prelimi
nary estimates from a study by reinsurer Swiss Re showed. This was 22 percent below the $27 billion first-half average for the previous 10 years.

The findings come as reinsurance executives prepare for their annual get-together in Monte Carlo next month and at a time when they are facing calls from insurance company clients to lower prices. Reinsurers such as Hannover and Swiss Re help their clients to cover claims from events such as earthquakes or floods in exchange for part of the premium.

Second-quarter figures showed that lower claims from natural disasters boosted reinsures' earnings. But this, coupled with signs of growing competition, has raised pressure on such companies to reduce prices. The Swiss Re study showed that insurers covered nearly half of the $44 billion in estimated economic losses from natural catastrophes and man-made disasters in the first half of 2014....

An entrance to one of Swiss Re's buildings in Zurich, shot by Alex Schröder, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

The sinking mega-cities

A bulletin from Lloyd's: As sea levels rise, ground levels in coastal megacities are also falling – with potentially disastrous implications for insurers. Insurers of large property portfolios in the world’s great coastal cities will have factored the effects of climate change into their catastrophe models – including rising sea levels and more frequent storm surges. But what’s often missed is that many of these cities are sinking faster than the water is rising. In some, subsidence outstrips sea level rise by a factor of ten to one.

Together with sea water inundation and flood damage, this can have disastrous consequences for the built environment – and property and business interruption insurers. The surge that overwhelmed New Orleans following Hurricane Katrina, and the subsequent cascading collapse of critical infrastructure, offered a glimpse of the sort of scenario underwriters fear. “We’re going down and the sea is coming up,” confirms Gilles Erkens, of the Deltares Research Institute in Utrecht. “Potential losses could run into hundreds of millions of dollars every year.”

The causes are varied. Foremost is large-scale groundwater extraction for drinking water and industrial processes – although elsewhere, like Los Angeles, it is oil and gas extraction that is to blame. Some urban areas are also constructed on multiple layers of soft soil, which compacts when built on – one of the problems facing New Orleans, for instance, and a feature of megacities that spring up on river deltas, such as Guangzhou in south west China.

One of the most severely affected cities was Tokyo, which grew rapidly in the middle of the last century and sunk over four metres as a result – until drastic remedial measures were put in place in the 1970s to restrict the extraction of groundwater. Since then the subsidence has stabilised. But from Jakarta and Dhaka to Venice, the risks are still all too real…

Jakarta is subsiding faster than any other megacity. The northern part has sunk by nearly four metres in the last 35 years, mainly due to groundwater extraction as the population has mushroomed and former agricultural land has been taken over by massive residential and industrial developments.

...Venice sunk about 120mm in the 20th century due to natural and human causes. In addition, the sea level rose about 110mm. A range of measures – such as restrictions on groundwater extraction – were introduced to stabilise the problem. But recent satellite mapping suggests these may not be enough, as the city is still subsiding by one to two millimetres a year. The causes are two-fold....

A waterside shanty in Jakarta, shot by Thehero, Wikimedia Commons, under the Creative Commons 2.0 license

Caribbean governments buy excess rainfall insurance

A little disclosure--I used to work at Swiss Re. From the Jamaica Observer: The Caribbean Catastrophe Risk Insurance Facility (CCRIF) announced on Monday that eight of its members have purchased excess rainfall insurance coverage for the 2014/2015 policy year. The countires — Anguilla, Haiti, Barbados, Dominica, Grenada, St Kitts & Nevis, St Vincent & the Grenadines and Saint Lucia — are the first of the 16-member group to have made the step. All members have had CCRIF hurricane and/or earthquake policies since 2007.

"The excess rainfall product," CCRIF said in a statement to the media, "is aimed primarily at extreme high rainfall events of short duration (a few hours to a few days), whether they happen during a tropical cyclone or not."

"Like CCRIF's tropical cyclone and earthquake insurance, the excess rainfall product is parametric and estimates the impacts of heavy rain using satellite rainfall data from the Tropical Rainfall Measurement Mission (TRMM) and exposure from
CCRIF's risk estimation database. Because the product is parametric, a payout can be made quickly (within 14 days) after a rain event that triggers a country's policy, without waiting for time-consuming damage and loss assessments on the ground," the insurers said.

The excess rainfall product was developed by CCRIF and global reinsurer Swiss Re. " We commend our eight members for taking the initiative and purchasing this ground-breaking product and hope that other countries in the region will follow," said CCRIF CEO Isaac Anthony, who added that Caribbean governments have eagerly awaited the new product as rainfall and flooding cause considerable damage in the region every year....

Is the US National Flood Insurance Program affordable?

Space Daily via SPX: There is often tension between setting insurance premiums that reflect risk and dealing with equity/affordability issues. The National Flood Insurance Program (NFIP) in the United States recently moved toward elimination of certain premium discounts, but this raised issues with respect to the affordability of coverage for homeowners in flood-prone areas. Ultimately, Congress reversed course and reinstated discounted rates for certain classes of policyholders.

Carolyn Kousky (Resources for the Future, USA) and Howard Kunreuther's (The Wharton School, University of Pennsylvania, USA) paper in the inaugural issue of the Journal of Extreme Events, "Addressing Affordability in the National Flood Insurance Program", examines the tension between risk-based rates and affordability through a case study of Ocean County, New Jersey, an area heavily damaged by Hurricane Sandy.

Kousky and Kunreuther argue that the NFIP must address affordability, but that this should not be done through discounted premiums. Instead, the authors propose a means-tested voucher program coupled with a loan program for investments in hazard mitigation.

As a condition for a voucher, homeowners would be required to take steps to invest in flood loss reduction measures such as elevating their property. They show that that the cost of a program to homeowners and the federal government would be considerably less than if a voucher were just provided to cover the cost of insurance.

Kousky and Kunreuther conclude that a more detailed, nationwide (United States) analysis is needed to estimate the costs to the federal government of a coupled voucher and mitigation loan program, as well as the expected benefits of reduced flooding losses in the future....

The 1979 Easter flood in Jackson, Mississippi, National Weather Service

Natural disaster costs down so far in 2014, according to Munich Re

Reuters: Floods, storms and other natural disasters claimed more than 2,700 lives and caused around $42 billion in damage worldwide in the first half of 2014, but this was well below the first half of last year and a 10-year average, reinsurer Munich Re said on Wednesday.

The world's biggest reinsurer said landslides and flash floods in Afghanistan were the deadliest disasters, claiming more than 650 lives, while snow storms in Japan were the costliest, with insured losses of more than $2.5 billion.

Storm "Ela", which hit parts of western Europe in early June, is expected to cost insurers about 1.8 billion euros ($2.5 billion), Munich Re said. In Germany alone, insured losses from the storm came to 650 million euros.

But the $42 billion bill in the first half and the $17 billion in claims paid by insurers were below the average of the last 10 years of $95 billion and $25 billion, respectively, Munich Re said in its six-monthly review of natural disasters. The number of deaths worldwide fell to a fraction of the 53,000 seen on average over the last 10 years and the 9,100 recorded in the first half of 2013.

"Of course, it is good news that natural catastrophes have been relatively mild so far," Torsten Jeworrek, Munich Re's board member responsible for the global reinsurance business, said in a statement. "But we should not forget that there has been no change in the overall risk situation."...

Lloyd’s US chief on board with climate change

Don Jergler in Insurance Journal: Despite risking offense to non-believers, Hank Watkins didn’t hesitate when he was asked if climate change was upon us. Watkins, president of Lloyd’s America, talked about an extensive report Lloyd’s of London just released, “Catastrophe Modeling and Climate Change.”

 “Everybody that produced this report on our behalf is in agreement that climate change is here,” he said. “I’d say the majority of them also suggested that man has certainly had a hand in that. We’re not suggesting that it’s happened over time, and there’s no cause and effect.”

The stance that the world’s oldest insurance firm is taking may not be too far out in the limb, because Lloyd’s headquarters is in the United Kingdom, a region of the world where the nation and its European neighbors seem have embraced the concept of climate change more so than other industrialized countries.

It’s one in a line of several reports and actions on climate change. Earlier this month the White House’s National Climate Assessment report was released as part of President Barack Obama’s effort to prepare the nation for the impacts of a changing climate now and in the future.

That report, which was guided by a 60-member federal advisory committee and was reviewed by experts, federal agencies and the National Academy of Sciences, was attacked by some as a political move timed so that Obama could renew his call for a national energy tax.

Farmers Insurance in April filed nine class actions against nearly 200 communities in the Chicago area arguing that local governments should have known rising global temperatures would lead to heavier rains and did not do enough to fortify their sewers and stormwater drains....

A storm drain in use, image by Robert Lawton, Wiukimedia Commons, Creative Commons 2.5 license

Lloyd's calls on insurers to take into account climate-change risk

Julia Kollewe in the Guardian (UK): Lloyd's of London, the world's oldest and biggest insurance market, has for the first time called on insurers to incorporate climate change into their models. The call to action comes a day after a landmark US report, named the National Climate Assessment, which has warned that climate change is wreaking havoc across the US.

Lloyd's says damage and weather-related losses around the world have increased from an annual average of $50bn in the 1980s to close to $200bn over the last 10 years. The 326-year-old insurance market, whose members write insurance business worldwide, believes the time has come for a formal call on the industry to take into account various climate-change scenarios to avoid unpredictable losses to businesses.

What the industry describes as extreme weather events have increased in number and severity as the global climate system has altered, causing more and bigger hurricanes, typhoons and heatwaves around the world. In the UK the main climate-change related risk is flooding.

...A new report by Lloyd's, which consulted the world's largest catastrophe modelling firms, says a 20cm rise in the sea level at the southern tip of Manhattan Island increased Superstorm Sandy's surge losses by 30% (up to $8bn) in New York alone.

The 840-page National Climate Assessment, published this week, was described by John Holdren, the White House science adviser, as the "loudest and clearest alarm bell to date signalling the need to take urgent action to combat the threats to Americans from climate change"...

Inside Lloyd's of London, shot by phogel, Wikimedia Commons via Flickr, under the Creative Commons Attribution-Share Alike 2.0 Generic license

New-concept flood insurance could help Bangladesh's poor

IRIN: A new insurance scheme in which pre-determined flood thresholds trigger speedy compensation offers hope for poor people in flood-prone Bangladesh, experts say. “Floods adversely impact the ability of the poor to earn a livelihood both by destroying assets and limiting opportunities for labour,” said Snehal Soneji, Oxfam International’s Bangladesh country director.

“This [insurance] product is index-based and operates at the meso-level, which means that payout is triggered on the basis of a certain threshold being reached resulting in immediate payout without the long process of surveying and then payout,” he explained, referring to traditional insurance schemes that rely on time-consuming damage assessment surveys to determine compensation.

According to a 2012 article in the journal Applied Economic Perspectives and Policy, “index insurance indemnifies the insured based on the observed value of a specified `index’ or some other closely related variable… [and] the most widely used index in index insurance contract designs is rainfall.”

A 2013 scoping report by the Malaysia-based research organization World Fish and a consortium of environment and agricultural agencies argued: “With current and anticipated increases in magnitude of extreme weather events and a declining consistency in weather patterns…there has been a growing interest in weather index-based insurance schemes in Bangladesh.”

Norul Amin, economic and private sector coordinator at Oxfam-Bangladesh, told IRIN: “There is strong demand for financial disaster recovery mechanisms, not only among the poor communities, but also insurance sector, donor agencies, micro-finance institutes and government officials.”...

In 2007, an aerial view over southern Bangladesh reveals extensive flooding as a result of Cyclone Sidr. US Marine Corps photo by Staff Sgt. Julius Hawkins (RELEASED)

Africa’s first ‘Islamic-compliant’ livestock insurance pays 100 Kenyan herders for drought-related livestock losses

Susan Macmillan in ILRI News: Today, for the first time in Africa, an insurance policy that combines an Islamic-compliant financial instrument with innovative use of satellite imagery is compensating Muslim pastoralists for drought-induced losses suffered in Kenya’s northeastern Wajir County, where livestock are valued at Ksh46 billion (USD550 million).

Thirty women and 71 men in arid and semi-arid Wajir are the first beneficiaries of livestock insurance that conforms to the Islamic concept of takaful, in which risks are shared among a group of participants. Through a contract called tabbaru (donation), participants make contributions to a risk fund. In the case of a payout, which happened today, the fund makes payments commensurate with the contributions received.

The pilot program is paying approximately Ksh500,000 (USD5,800) for losses suffered to their herds of sheep, goat, cattle and camels during the long dry season that typically ends in March. The herds were insured last August by Takaful Insurance of Africa (TIA) with an Index-Based Livestock Insurance (IBLI) product, branded as Index-Based Livestock Takaful (IBLT).

IBLI uses satellite imagery—measuring the conditions of grazing lands—that is fed into an algorithm that predicts livestock loses. Predictions beyond the 15-percent level trigger indemnity payments. Drought conditions in much of Wajir County have surpassed the index trigger and active contract holders in these areas were compensated today.

This payout is critical for building confidence in the concept of insurance for the pastoral, drought-prone regions of East Africa, where life revolves around livestock and droughts can bring disaster,” said Andrew Mude, who leads the IBLI program of the Nairobi-based International Livestock Research Institute (ILRI)....

Wajir from the air, shot by lex Maisuradze, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Global insured losses from catastrophes were USD 45 billion in 2013, Swiss Re sigma says

A press release from my former employer, Swiss Re:  According to the latest sigma study, global insured losses from natural catastrophes and man-made disasters were USD 45 billion in 2013, down from USD 81 billion in 2012. Of the 2013 insured losses, USD 37 billion were generated by natural catastrophes, with hail in Europe and floods in many regions being the main drivers.

• Total economic losses from natural catastrophes and man-made disasters were USD 140 billion in 2013
• Global insured losses were around USD 45 billion in 2013, with large contributions from flooding and hail events
• Around 26 000 lives were lost in natural catastrophes and man-made disasters in 2013
• A special chapter on climate change in the sigma says rising global temperatures are expected to lead to shifts in the frequency, intensity and duration of extreme weather events

Total economic losses from catastrophic events were USD 140 billion, down from USD 196 billion in 2012 and well below the 10-year average of USD 190 billion. The number of victims in disaster events grew to around 26 000 in 2013 from 14 000 the previous year.

Asia was hardest hit by natural catastrophes in terms of economic losses and victims. Typhoon Haiyan in the Philippines in November brought some of the strongest winds ever recorded, alongside heavy rains and storm surges. Around 7 500 people died or went missing, and more than 4 million were left homeless. The second biggest humanitarian disaster of 2013 was the June flooding in the state of Uttarakhand in India, which claimed some 6 000 lives.

Europe suffered the two most expensive natural disaster events in 2013. Massive flooding in central and eastern Europe in May/June after four days of heavy rain caused large-scale damage across Germany, the Czech Republic, Hungary and Poland. Total economic losses were USD 16.5 billion, and the insured loss was USD 4.1 billion. Not long after, in late July parts of Germany and France were hit, this time by severe hailstorms. The storms struck heavily populated areas in Germany, which, according to latest estimates, generated most of the entire insured loss total of USD 3.8 billion, the largest ever from a hail event, worldwide...

Flood insurance and risk subsidies on Long Island

Long Island Newsday: Nearly 60,000 policyholders in New York, including as many as 26,000 on Long Island, are among the 1.1 million nationwide who could see their federally subsidized flood insurance premiums rise as part of changes to the National Flood Insurance Program, according to a review of federal data by The Associated Press.

President Barack Obama on Friday signed into law a measure to delay steep increases from a 2012 overhaul that aimed to shore up the cash-strapped program by phasing out subsidies and requiring policyholders to begin paying risk-based rates immediately. While the law was widely hailed as a victory for people who had seen their bills triple, quadruple or even increase 15-fold overnight, pocketbook pain for many merely has been delayed.

...Long Islanders with subsidized government flood insurance still will be hit with steady rate increases, despite the law. While no one is sure yet how high rates will go, there is cause for worry in places such as Long Beach, Freeport, Babylon Town, Hempstead Town and elsewhere that rely on affordable policies to keep businesses afloat and prop up the local housing market.

For years, waterfront communities across the country have relied on insurance that was far cheaper than the risks warranted, and the federal government paid the difference. When Congress tried to stem the red ink by raising rates to reflect the real costs, people in the flood plains screamed -- and the politicians listened.

But at least 21,000 homeowners in Nassau and Suffolk counties still will be hit with rate increases of as much as 18 percent each year until the program is collecting enough revenue to cover a $24 billion shortfall created by the long-running discounts and a series of catastrophic storms. That includes 5,700 homeowners in the Town of Hempstead, 2,000 in the City of Long Beach and 1,500 in the Town of Oyster Bay....

Hurricane Sandy in Long Beach, New York, New York National Guard photo