Meeting the Unmet Demand Insuring the Uninsurable Climate Change and Insurance Munich Re – GERMANWATCH Briefing 2004 Arun Kashyap Climate Change & CDM Adviser UNDP 10 May 2004

Presentation Format  Underlying Principle  Why, What, How  Possible Strategy & Interventions  Debt Swaps  Linking disaster assistance with prevention/mitigation of adverse impacts of disasters  Next Steps

Underlying Principle – Why?  Millennium Development Goal  Halve the proportion of people living in extreme poverty by 2015  Water, Energy, Health, Agriculture & Biodiversity (WEHAB) Climate Change - a cross cutting issue Possible basis for provision of insurance services

Hypotheses  Disasters contribute to persistent poverty  Reducing vulnerability is about risk reduction and risk management  Sustainable livelihood implies reduced vulnerabilities  Disasters reduction efforts make economic and development sense  Insurance as a safety net mechanism can contribute towards overall economic development

Enhanced Vulnerability  Climate variability and change significantly endanger livelihoods  Increase in the frequency and intensity of extreme events  Natural disasters  Frequency and intensity of droughts  High human and economic costs in Developing Countries

Focus of Interventions -- What?  Reducing vulnerability to shocks and stresses  Strengthening sustainable livelihoods Access to resources Building Assets Developing capabilities

Focus of Interventions – How?  Adaptation (Risk management) interventions must be integrated in to national strategies for poverty eradication  Translating new and existing knowledge into policy formulation and implementation Innovative and integrative approaches to capacity development Undertake Pilot Projects

Possible Interventions Disaster Management Continuum  Priority  Disaster Reduction (Prevention, Mitigation and Preparedness)  Follow up  Disaster Response (Relief, Rehabilitation, Reconstruction) Debt for Adaptation Swaps (MDG)

Debt Swaps Public Private Engagement  National Host Governments (Sustainable development priorities  Bilateral (debt write off and terms of reference)  Private Sector (Insurance possibilities – premiums nature of contracts)  Multilateral organizations (Due Diligence)  Civil Society (Due Diligence) Learning by doing

Disaster Reduction Public Private Engagement  National Host Governments (sustainable development priorities)  Bilateral (Resource advancement from disaster mitigation budget)  Fulfilling Monterey commitment  Engaging the Private Sector (Insurance possibilities)  Linking local action to global mandates  Transparency, Monitoring and Evaluation

Premise for Insurance  Community/province/state level rather than household  Guaranteed premium payment  Diversification of risk  Partial Coverage of extreme events/natural disasters  Lessons from developed countries  New Insurance products  Commercial debt insurance

Next Steps  Strengthen Insurance & Sustainable Development linkage  Relationship: risk management, insurance and adaptive capacity  Foster dialogue: Re/insurance industry, governments and civil society  Seek partnerships

Next Steps: Barbados+10 Risk Management, Adaptation and Insurance for SIDS  Comprehensive paper  Side Event  MoU  Pilot Projects

Selection of Pilot Countries  LDC/Highly Indebted  Presence of basic infrastructure  Insurance industry  Enabling policy framework  Political commitment  Private sector/bilateral interest  Direct Foreign Investment/Commercial Debt  Replicability