Climate Risk Mitigation Through Risk Insurance
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Climate Risk Mitigation Through Risk Insurance

In TERI-IGES Policy Research Workshop on International Climate Change Regime Beyond 2012 29th – 30th August, 2011 2011-08

Risk insurance can provide an effective means of catastrophic risk reduction and climate change adaptation in the developing countries. The ongoing discussions by the Conference of Parties to the United Nations Framework Convention on Climate Change are putting substantial efforts to promote climate change adaptation through international cooperation in the form of providing additional finances and technologies including proposals to promote a global or regional climate risk insurance facility. Case studies from within and outside the Asia-Pacific region provide valuable lessons which could be used for promoting risk insurance by the future climate regime (post-Kyoto Protocol beyond 2012). The analysis of these risk insurance proposals to the Convention and comparison of what they intend to achieve with that of the existing issues within the risk insurance sector in the developing Asia-Pacific indicate that these proposals address some of the major issues that are limiting the spread of risk insurance. However, no single proposal is comprehensive enough to address all the issues and all the proposals lack details in terms of how they can achieve what they intend to achieve. There is a need for the proposals to the Convention to give more thought on how they address the issues such as high base risks, lack of historical data required for designing risk insurance systems, limited awareness in the utility of insurance instruments, keeping the premium prices within affordable levels, encouraging the role of private sector, enabling greater access to reinsurers, and instituting enabling policies to create a proactive risk mitigation environment with an eye on sustainability. A convergence approach wherein the proposals incorporate lessons from on-the-ground experiences from regional, national and local initiatives could provide an effective model for promoting the risk insurance.

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