Insurance instruments for adaptation to climate risks : linking policy agendas

Adaptation to climate change is a concern for all countries, and particularly for highly vulnerable countries in the developing world. This paper addresses the viability of public and private insurance systems that serve the poor and that contribute to the reduction of vulnerability to losses; the role of private, public and international institutions in providing insurance instruments within and outside the post-Kyoto adaptation regime, and the potential for linking climate-change and development agendas. As an alternative to providing aid after disasters, it recommends that insurance, by pricing risks, can be a powerful instrument for promoting adaptation. Public/private partnerships backed by international capital can be instrumental, even essential, in enabling insurance in developing countries. The creation of regional insurance and adaptation facilities (beginning with an African facility) are strongly recommended. These will not provide insurance directly, but would channel international capital to support private and public/private initiatives by providing, among other services, technical support, hardware (such as weather stations), facilitation of pooling and accessing reinsurance, and absorbing upper layers of risk. Linking the agendas of development and climate adaptation has the potential to bring the needed capital and expertise to this challenge. It is hoped that a continued dialogue will contribute to designing options for enhancing insurance as an adaptation strategy within and outside the UN post-Kyoto regime.