Insurance as a Response to Loss and Damage?

This chapter asks whether insuranceInsurance instruments, especially micro-insuranceInsurance and regional insuranceInsurance pools, can serve as a riskRisk -reducing and equitable compensatory response to climate-attributed lossesLosses and damages from climate extremes occurring in developing countries, and consequently if insuranceInsurance instruments can serve the preventative and curative targets of the Warsaw International Mechanism for Loss and DamageLoss and damage (WIM). The discussion emphasises the substantial benefits of both micro-insuranceInsurance programs and regional insuranceInsurance pools, and at the same time details their significant costs. Beyond costs and benefits, a main message is that if no significant intervention is undertaken in their design and implementation, market-based insuranceInsurance mechanisms will likely fall short of fully meeting WIM aspirations of loss reduction and equitable compensationCompensation . Interventions can include subsidies and other types of support that make insuranceInsurance affordable to poor clients; interventions can also enable public-private arrangements that genuinely catalyse riskRisk reduction and adaptationAdaptation . Many such interventions are already in place, and the chapter highlights two potential success stories for insuranceInsurance instruments serving the most vulnerable: the African R4 micro-insuranceInsurance program and the African RiskRisk Capacity (ARC) regional insuranceInsurance pool. While support to these and other insuranceInsurance programs continues to be framed as humanitarian aid based on the principle of solidarity, discussions on the G7 initiative to insure vulnerable households, as well as on ARC’s initiative to link international payments to climate risks, raise the question whether the narrative will evolve from solidarity to responsibilityResponsibility based on the principle of developed country accountability.