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Insurance, Developing Countries and Climate Change

Author

Listed:
  • Joanne Linnerooth-Bayer

    (International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, A-2364 Laxenburg, Austria)

  • Koko Warner

    (United Nations University Institute for Environment and Human Security (UNU-EHS), UN Campus, Hermann-Ehlersstr 10, D-53113 Bonn, NRW 53113 Germany)

  • Christoph Bals

    (Germanwatch e.V., Dr.Werner-Schuster-Haus, Kaiserstr 201, D-53113 Bonn, Germany)

  • Peter Höppe

    (Munich Re GeoRisks Department, Königinstr 107, D-80802 Munich, Germany)

  • Ian Burton

    (Munich Re Foundation, D-80791 Munich, Germany)

  • Thomas Loster

    (Munich Re Foundation, 26, St. Anne's Road, Toronto, ON M6J 2C1, Canada)

  • Armin Haas

    (Potsdam Institute for Climate Impact Research (PIK), Telegrafenberg A 31, 14473 Potsdam, Germany)

Abstract

By providing financial security against droughts, floods, tropical cyclones and other forms of weather extremes, insurance instruments present an opportunity for developing countries in their concurrent efforts to reduce poverty and adapt to climate change. By pricing risk, insurance provides incentives for reducing risks and adapting to climate change; if these premiums are not affordable to the most vulnerable, donors can combine premium support with risk-reduction measures. In this paper, we examine the costs, benefits and risks of public-private (and donor supported) insurance programmes that offer affordable economic security to vulnerable communities and governments. Insurance mechanisms are of particular interest to climate negotiators seeking strategies that help vulnerable countries adapt to increasing severity and frequency of weather disasters, and we examine the case for including insurance mechanisms in a climate adaptation strategy expected to be agreed in Copenhagen in 2009. We present a proposal for this purpose that has been recently put forward by the Munich Climate Insurance Initiative (MCII), which calls for international solidarity for very low probability and high consequence weather-related events (high-risk layer). For middle-layer risks the MCII proposal calls for international support to promote sustainable, affordable and incentive-compatible insurance programmes that serve the poor without crowding out private sector involvement. The Geneva Papers (2009) 34, 381–400. doi:10.1057/gpp.2009.15

Suggested Citation

  • Joanne Linnerooth-Bayer & Koko Warner & Christoph Bals & Peter Höppe & Ian Burton & Thomas Loster & Armin Haas, 2009. "Insurance, Developing Countries and Climate Change," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(3), pages 381-400, July.
  • Handle: RePEc:pal:gpprii:v:34:y:2009:i:3:p:381-400
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    Citations

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    Cited by:

    1. Stéphane Hallegatte, 2012. "An exploration of the link between development, economic growth, and natural risk," Post-Print hal-00802047, HAL.
    2. Biener, Christian, 2013. "Pricing in Microinsurance Markets," World Development, Elsevier, vol. 41(C), pages 132-144.
    3. Phung Thanh Binh & Xueqin Zhu & Rolf Groeneveld & Ekko van Ierland, 2016. "Mediation Analysis of Factors that Influence Household Flood Mitigation Behavior in Developing Countries: Evidence from the Mekong Delta, Vietnam," EEPSEA Research Report rr20160311, Economy and Environment Program for Southeast Asia (EEPSEA), revised Mar 2016.
    4. Alex Y. Lo, 2013. "Household Preference and Financial Commitment to Flood Insurance in South-East Queensland," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(2), pages 160-175, June.

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