Climate risk insurance is increasingly being put forward as a viable solution to helping those suffering losses and damage from climate change, according to a panel at COP22 in Morocco.
The panel yesterday explored how micro-insurance could be used to help the poorest face extreme weather-events related to climate change, such as droughts or cyclones.
“The cost of weather-damage is significantly less,” said panelist Aaron Oxley, executive director, Results UK, “than if they had to wait for months to receive relief.”
Based on research from the African Risk Capacity, which distributes weather-related insurance packages across Africa, Oxley explained that such financial products can reduce the cost of droughts four to five times.
But the benefits of climate risk insurance go beyond a “cash-in and cash-out” mechanism. If done properly, a good insurance programme would raise awareness about climate risks and encourage vulnerable clients to invest in risk prevention strategies.
“Insurance is absolutely not a silver bullet,” Oxley argues. “I come from the microcredit sector, which was branded as a silver bullet to solve poverty and it wasn’t. We don’t want to make the same claim with insurance. In fact, insurance works better for the poor when it is tied to other social protection programmes.”
Also, climate risk insurance only works for certain types of climate change impacts. Asked about slow onset events such as sea-level rise, the panelists were willing to admit insurance was not the right tool for this.