Four associations on climate change initiatives, which represent more than 100 insurance companies, are urging world leaders and governments to use insurance-linked products and risk management mechanisms to help developing countries deal with the impact of climate change, reports Reuters.
Insurance think tank the Geneva Association, along with insurance industry lobby groups ClimateWise, the Munich Climate Insurance Initiative (MCII) and the United Nations Environment Programme Finance Initiative (UNEP FI), called for global governments to use better risk management and insurance-type approaches to help protect developing countries from natural disasters, according to the article.
The associations’ joint statement (PDF) to world leaders and negotiators taking part in the UN Framework Convention on Climate Change (UNFCCC) also noted that risk management mechanisms are falling short of their potential in helping developing countries adapt to climate change, according to the UN. The statement also called for governments to formally recognize the potential role that insurance can play in UN climate negotiations.
UNEP FI says the insurance industry can play an important role in supporting governments to prioritize adaptation measures, incentivize loss reduction, develop new products to cover emerging risks and raise awareness among many stakeholders.
The insurance industry, including reinsurers, who distribute risk around the sector, has traditionally been the main way to hedge against hurricanes, floods and other national disasters, reports Reuters.
They also transfer risks associated with natural disasters to capital markets investors. As an example, last year, Swiss Re partnered with the World Bank to issue a $290 million catastrophe bond to cover against earthquakes and hurricanes in the city, according to the article.
Natural catastrophes, with nearly 80 percent of them weather-related, have amounted to losses of $90 billion annually for the past three decades, according to the UN. In addition, 85 percent of all deaths associated with natural disasters occurred in developing countries.