Climate change risk insurance
Pacific dialogue in Samoa initiates further steps towards critical climate change risk insurance for the region
Government officials from across the Pacific joined global experts from the private sector in a regional dialogue to discuss the role of climate risk financing in the region’s resilience to climate change.
The forum culminated in an agreement to submit the idea of establishing mechanisms for insurance and risk financing dedicated to addressing climate change impacts, to the Leaders meeting of the Pacific Islands Forum.
Initiated by the government of Tuvalu, the dialogue was convened with the view of building national capacity in cost-effective risk management and exploring a dedicated climate change insurance facility for the region, an idea floated by Tuvalu to the Pacific Island Countries delegations at the UN climate conference COP 22 in 2016.
The C.E.O. of the Office of the Prime Minister of Tuvalu, Fakavae Taomina, expressed his appreciation of the response to Tuvalu’s initiative.
”The Government of Tuvalu is very happy to receive support from the UN Development Programme (UNDP), the Secretariat of the Pacific Regional Environment Programme (S.P.R.E.P.) and Australian Aid to initiate this dialogue event. We are looking at creating an institution that will look after insurance against climate change,” said Fakave.
“The Government of Tuvalu is very serious about the advice we received this week and the expression of knowledge, and the expression of the quality of the concept note that we are going to develop and present to the leaders.”
Lizbeth Cullity, United Nations Resident Coordinator and U.N.D.P. Resident Representative said the dialogue provided an important platform to exchange knowledge, draw on the experiences of existing set ups – such as the Caribbean Risk Insurance Facility, the African Risk Capacity and the Pacific Catastrophe Risk Assessment and Insurance Facility – and tease out the most suitable options for climate risk financing and risk transfer here in the region.
“The impacts of climate change and related disasters cause significant setbacks, or even reverse development progress,” she said.
“To meet the challenges ahead, and to protect the lives and livelihoods of communities across the Pacific, it is crucial to explore all the tools at our disposal. The discussions this week highlighted that there are no current financial or insurance products to help with many climate challenges faced by many Pacific countries.”
With geographical exposure and small and fragile economies, small island developing states are disproportionately exposed to climate-related shocks and disasters.
In addition, they face “slow-onset” events such as coral bleaching and sea level rise that threaten populations and economies. Recently, five reef islands have been washed away completely and six more have been severely eroded in the Solomon due to a combination of sea-level rise and high wave energy.
Financial products for climate resilience and risk management, such as insurance, have the ability to create long-term potential for resilient growth opportunities, in both the public and the private sectors.
Most of the insurance products to date focused on disaster-related aspects. Addressing the key climate impacts faced by the Pacific nations would require innovation, new financial products from insurance and other financial sectors, such as resilience bonds.
“There are many risk factors associated with climate change that are not being covered at the moment with the instruments that are available and there is a need to look beyond insurance schemes and consider alternative financing through which finances could be made available to the Pacific island countries.” explained Iosefa Maiava, Head of the Subregional Office for the Pacific of the United Nations Economic and Social Commission for Asia and the Pacific (U.N.E.S.C.A.P.).
One of the key issues which emerged during the forum was that many countries in the Pacific countries don’t have insurance presence. The insurance sector in the Pacific is small and requires strengthening, including improving its regulatory framework to enhance its contribution to building resilience in the region.
The participants asked Tuvalu to put a proposal to the upcoming Leaders meeting of the Pacific Islands Forum outlining the urgent need to start addressing the financial risks from specific climate change impacts, and explore options for a regional facility including building upon the efforts and arrangements of the Pacific Catastrophe Risk Assessment and Financing Initiative.
The participation of government officials, partners and the private sector enabled a better understanding of needs of Pacific countries and the potential contributions and limitations of insurance products.
The discussions held in Apia are a first step to explore options for risk insurance and risk sharing for climate change, an issue called for under the Paris agreement and which will be further discussed in the upcoming climate change C.O.P under Fiji Presidency.