Insurance for Climate Adaptation: Opportunities and Limitations
Strategic management experts say greater collaboration between the insurance industry and state policy makers, including investment in open-source risk models, could improve society’s ability to recover from disasters linked to climate change.
The increasing frequency and severity of climate-change-driven disasters threaten lives and livelihoods, food security, water supply, property security, and economic prosperity across the globe.
Adapting to climate change, by increasing our ability to recover from specific disasters, reducing vulnerability around the globe and promoting both financial and physical resilience to its effects, is vital to society – and insurance can be a key tool in this.
Using insurance is a step away from crisis towards risk management, and it strengthens socio-economic resilience under a changing climate.
However, it is only one of the available disaster-risk financing mechanisms and needs to be considered within a broader fiscal framework that also includes international assistance, catastrophe debt drawdowns, and other financial securities, disaster reserves and budgets.
In this background paper submitted to the Global Commission on Adaptation seven recommendations are made to maximise the benefits of insurance for climate adaptation.