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Insurance for assisting adaptation to climate change in developing countries: a proposed strategy

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  • Joanne Linnerooth-Bayer
  • Reinhard Mechler

Abstract

This paper suggests a two-tiered climate insurance strategy that would support developing country adaptation to the risks of climate variability and meet the intent of Article 4.8 of the United Nations Framework Convention on Climate Change (UNFCCC). The core of this strategy is the establishment of a climate insurance programme specialized in supporting developing country insurance-related initiatives for sudden- and slow-onset weatherrelated disasters. This programme could take many institutional forms, including an independent facility, a facility in partnership with other institutions of the donor community, or as part of a multi-purpose disaster management facility operated outside of the climate regime. Its main purpose would be to enable the establishment of public-private safety nets for climate-related shocks by assisting the development of (sometimes novel) insurance-related instruments that are affordable to the poor and coupled with actions and incentives for pro-active preventive measures. A second tier could provide disaster relief contingent on countries making credible efforts to manage their risks. Since it would be based on precedents of donor-supported insurance systems in developing countries, a main advantage of this proposed climate insurance strategy is its demonstrated feasibility. Other advantages include its potential for linking with related donor initiatives, providing incentives for loss reduction and targeting the most vulnerable. Many details and issues are left unresolved, and it is hoped that this suggested strategy will facilitate needed discussion on practical options for supporting adaptation to climate change in developing countries.

Suggested Citation

  • Joanne Linnerooth-Bayer & Reinhard Mechler, 2006. "Insurance for assisting adaptation to climate change in developing countries: a proposed strategy," Climate Policy, Taylor & Francis Journals, vol. 6(6), pages 621-636, November.
  • Handle: RePEc:taf:tcpoxx:v:6:y:2006:i:6:p:621-636
    DOI: 10.1080/14693062.2006.9685628
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    References listed on IDEAS

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    1. Karen M Clark, 2002. "The Use of Computer Modeling in Estimating and Managing Future Catastrophe Losses," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 27(2), pages 181-195, April.
    2. Auffret, Philippe, 2003. "Catastrophe insurance market in the Caribbean Region : market failures and recommendations for public sector interventions," Policy Research Working Paper Series 2963, The World Bank.
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    Cited by:

    1. Hochrainer, S. & Mechler, R. & Pflug, G. & Lotsch, A., 2008. "Investigating the Impact of climate change on the robustness of index-based microinsurance in Malawi," Policy Research Working Paper Series 4631, The World Bank.
    2. Chipo Plaxedes Mubaya & Paramu Mafongoya, 2017. "Local-level climate change adaptation decision-making and livelihoods in semi-arid areas in Zimbabwe," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(6), pages 2377-2403, December.
    3. Dobes Leo & Jotzo Frank & Stern David I., 2014. "The Economics of Global Climate Change: A Historical Literature Review," Review of Economics, De Gruyter, vol. 65(3), pages 281-320, December.
    4. Janna D. Tenzing, 2020. "Integrating social protection and climate change adaptation: A review," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 11(2), March.
    5. Pascale Combes Motel & Jean-Louis Combes & Bao-We-Wal Bambe & Chantale Riziki Oweggi, 2023. "Does Climate Change Affect Firms’ Innovative Capacity in Developing Countries ?," Working Papers hal-04341934, HAL.
    6. Nicole D. Peterson, 2012. "Developing Climate Adaptation: The Intersection of Climate Research and Development Programmes in Index Insurance," Development and Change, International Institute of Social Studies, vol. 43(2), pages 557-584, March.
    7. Daniel Osberghaus, 2017. "Prospect theory, mitigation and adaptation to climate change," Journal of Risk Research, Taylor & Francis Journals, vol. 20(7), pages 909-930, July.
    8. Biener, Christian, 2013. "Pricing in Microinsurance Markets," World Development, Elsevier, vol. 41(C), pages 132-144.
    9. Fisher, Monica & Chaudhury, Moushumi & McCusker, Brent, 2010. "Do Forests Help Rural Households Adapt to Climate Variability? Evidence from Southern Malawi," World Development, Elsevier, vol. 38(9), pages 1241-1250, September.

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