When the United Nations conference convenes in Paris this December to craft a new global climate agreement, it will not only discuss measures wealthy nations can take, but also will look to aid the most vulnerable nations in adapting to climate change.
Rising sea levels and growing numbers of extreme weather catastrophes cannot be ignored, even if their impact varies greatly from region to region. The Western world is expected to take the greatest financial hit in absolute terms, but poorer countries face a much more daunting future. They not only will be required to deal with severe humanitarian consequences, but also in terms of relative economic strength, will suffer the greatest damage. Thus, adaptation to a changing world is an essential building block for economic development.
The G7 countries have acknowledged the role of so-called “climate risk insurances” to finance climate change – though it would be more accurate to call them “climate change impact risk insurances.”
The G7 nations want to see 400 million people in developing and emerging economies covered by insurance protection against extreme weather events by 2020. On the macro level, this means insurance for entire countries, such as the African Risk Capacity, which provides drought insurance for African countries, while on the micro level it offers insurance for individuals.
Payments would be made in cases of clearly defined weather events determined by objective parameters, whether drought, storm or floods, depending on the insurance needs of the contractual partner. This mechanism makes administration of the program relatively easy and cheap to implement.