If you only read one thing this week…

Insurance against climate change by ifyouonlyreadonethingthisweek
November 19, 2009, 5:32 pm
Filed under: Development theory, If you have 30 mins, Uncategorized

“Climate change is a development issue” Douglas Alexander, UK Secretary of State

What’s the best way to deal with climate change? Oxfam America recently published a report, “The New Adaptation Marketplace: Climate Change and Opportunities for Green Economic Growth,” that highlights many industries and businesses, including the insurance, industry that may grow due to climate change. Insurance companies have been offering insurance against climate and weather-related causes as a means for individuals and companies to protect against ever-growing environmental changes. Companies like Zurich Financial Services Group and Swiss Re advocate that insurers can play a role in both mitigating and addressing climate change by encouraging and rewarding technologies that help with climate issues, and through supporting improving and building better infrastructure to withstand future problems. With the Zurich Financial Services Group noting that weather-related claims have grown nearly fifteen-fold in the past thirty years, climate insurance seems posed continue growing both as a business sector and resource.

But with the development of this insurance niche comes questions about how climate policy is assessed and carried out, and who will be able to afford these policies. The National Association of Mutual Insurance Companies’ Climate Change and Global Warming Task Force notes insurance is contingent on risk assessment and certification, along with a “statement of catastrophe.” Swiss Re uses four indices to assess risk: weather, precipitation, wind and a combination of all three). But the Climate Change task force also notes that issues may arise in areas where there is a high-level of risk contrasted by low-level preparedness, such as in developing countries. With insurance premiums typically linked to risk, is it possible for those in poorer areas of the world (who may also be a greater risk of weather issues and climate change) to afford to insure themselves?

Additionally developed countries such as the United States are not immune to concerns climate insurance. The Climate Change task force also raised concern about companies having enough capital to fill claims when disasters hit. Hurricane Ike, the 2008 storm that hit Florida, caused nearly $11.5 billion in insurance losses.

With all companies emphasizing risk reduction as central to climate insurance, watching how companies and groups address this in both developing and developed countries. As the severity of our climate continues to change, so too will the means and methods of addressing it.


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