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Reducing risks, safeguarding losses, increasing resilience – the role of climate insurance in climate change adaption.
Germany’s Development Minister Dr Gerd Müller emphasised the importance of climate risk insurance for developing countries, the hardest hit by climate change. He spoke at a May 7, 2015 event in the Gasometer in Berlin organised by the GIZ’s Development Policy Forum as part of the G7 presidency.
In front of around 200 guests, Minister Müller spoke about the enormous threat climate change posed for developing countries, noting it had the power to destroy development at a stroke. Climate risk insurance offered a viable alternative for quickly providing aid to victims of devastating droughts or floods, he said. The high-ranking podium guests included Anote Tong, President of the island Republic of Kiribati, Dr Ngozi Okonjo-Iweala, Minister of Finance of Nigeria, and Achim Steiner, Executive Director of the UN Environmental Programme (UNEP).
Minister Müller emphasised that mitigating climate change was a top priority for the German G7 Presidency and German Chancellor Angela Merkel placed it on the agenda for the G7 Summit in the Bavarian town of Elmau. More than 300 million people had suffered from the negative impact of climate change in recent years, and nine of ten nations affected were developing countries, Müller said.
Minister Müller announced that Germany would contribute 150 million euros to the G7 initiative to develop a climate risk insurance system. The goal, he said, was not simply to manage catastrophes, but also to cover risks for victims. To date only around 100 million people in developing nations have coverage, according to Müller, a number that should be increased to 500 million within five years.
Following a video address from UN General-Secretary Ban Ki-moon, President Anote Tong highlighted the pressing need for global climate change mitigation in his keynote address. His country was facing imminent destruction and could serve as a cautionary tale, he said. The villages Kiribati were subjected to increasingly severe floods and the government was finding it harder and harder to raise the growing funds needed to repair the damage, President Tong said.
Nigeria’s Minister of Finance, Dr Ngozi Okonjo-Iweala, introduced African Risk Capacity (ARC), where she chairs the Advisory Board. Founded by the African Union, ARC offered a way to insure member states against drought for a premium adequate to the risk, Dr Okonjo-Iweala said. It allowed for a rapid response when crops were lost to climate change and encouraged states to invest more in prevention.
Achim Steiner emphasised the importance of climate risk insurance, adding that the UNEP had been a staunch supporter of such coverage for many years. He warned that the increasingly dire effects of climate change would soon become uninsurable.
BMZ State Secretary Dr Friedrich Kitschelt described mitigating the effects of climate change as an important responsibility for the G7 states. Emerging nations also needed to stand alongside the industrialised nations and contribute what they could. The private sector needed to play its part too, he said, adding “We can’t do it without them.”
Amer Ahmed, CEO of Allianz Re, said that the damage caused by storms in the past ten years amounted to around 100 billion dollars globally against which victims were not insured. The insurance sector and future policy holders had to come together and agree on a shared agenda, according to Ahmed.
In the afternoon, the expert audience which comprised representatives from politics, the financial and insurance sectors, research institutes, and NGOs, divided into working groups to draft policy recommendations the G7 initiative on climate risk insurance.
Each working group presented their recommendations and BMZ Department Head Ingrid-Gabriela Hoven promised that they would be systematically assessed and incorporated. Germany would continue to coordinate with partner countries on climate risk insurance and work to implement shared solutions, she said.
Dr Juerg Trueb, Managing Director at Swiss Re, said fundamentally the insurance sector was prepared to create a range of policy options. “Demand, not the range of services” was the key, he added. The respective needs of policy holders from small-holder farmers up to national governments needed to be assessed and defined so the respective insurance products could be developed, Dr Trueb said.
In his closing address, Parliamentary State Secretary at the BMZ, Thomas Silberhorn, again emphasized the German government’s dedication to creating better framework conditions for climate risk insurance, since it was an important instrument for mitigating climate change, especially for the world’s poorest citizens.