Risk Transfer, Insurers Failing in Climate Change: UN

Chris Westfall
Chris Westfall

Risk transfer mechanisms, including reinsurance and microinsurance, are not increasing the worlds “resilience” to climate change, according to a report issued by the U.N.’s Intergovernmental Panel on Climate Change on Friday.

According to the report, “Uptake of formal risk sharing and transfer mechanisms is unequally distributed across regions and hazards,” and are not effectively increasing “the resilience to climate extremes,” on a global scale.

“These mechanisms are linked to disaster risk reduction and climate change adaptation by providing means to finance relief, recovery of livelihoods, and reconstruction, reducing vulnerability, and providing knowledge and incentives for reducing risk,” the report adds. “Under certain conditions, however, such mechanisms can provide disincentives for reducing disaster risk.”

The panel’s report said that it has “medium confidence” that private risk transfer methods such as microinsurance, insurance, reinsurance, and national, regional, and global risk pools impacting climate change.

Despite the insurance markets ineffectiveness, however, losses will continue to pile up. The IPCC said in its report that greenhouse gas emissions have already led to more record-high temperatures and fewer record lows, as well as to more extremes of precipitation and to greater coastal flooding, the report said

“[The report] also underlines the complexity and the diversity of factors that are shaping human vulnerability to extremes–why for some communities and countries these can become disasters whereas for others they can be less severe,” said Rajendra Pachauri, chair of the IPCC in a statement.

The report was issued following a meeting of the IPCC in Kampala, Uganda, that ended this week.