International workshop on insurance solutions for adaptation to climate change

At the invitation of the Peruvian environment ministry, an international workshop on ‘Insurance for Adaptation to Climate Change for the Public, Productive and Financial Sectors' took place in Lima from 12 to 14 October 2011. The event was organised by the International Climate Initiative (ICI) project 'Insurance for Adaptation to Climate Change' - which is being implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH - together with the Peruvian partner ministries, the United Nations International Strategy for Disaster Reduction, the Swiss Confederation and other institutions. The aim of the workshop was to discuss innovative pre-financing mechanisms for adaptation to climate change.

More than 170 experts from public institutions, non-governmental organisations, the private sector and various initiatives and interest groups in Latin America and other regions took part in the workshop. The speakers included high-profile guests such as Andrew Maskrey, head of the United Nations Development Programme's Disaster Reduction Unit, Dr Koko Warner, director of the Munich Climate Insurance Initiative, and Dr Jerry Skees, president of GlobalAgRisk, a consulting company specialising in index insurance.

Index-based insurance was one of the key topics covered at the event. In contrast to traditional insurance, which pays out only when damage has occurred, this type of insurance utilises an indicator - such as the amount of rainfall or the sea temperature - which is specified in the insurance policy. If the indicator is reached, this triggers payment of the insured sum, irrespective of the actual damage. This does away with complex measurements of damage that would otherwise drive up administration costs, and so makes insurance affordable even for poorer sections of the population. Participants also discussed the role of Public Private Partnerships (PPP) in the successful dissemination of insurance and considered how potential customers could be made aware of the workings and advantages of insurance. This awareness-raising and the development of an insurance culture - especially in less developed, rural areas - are crucial to the long-term success of insurance against climate risks.

All the speakers stressed that the importance of insurance products in the context of worldwide climate change is growing. The experts present considered it important to boost forward-looking, preventive measures as opposed to retroactive emergency aid. One of the major challenges associated with the development of index-based insurance is the establishment of reliable information systems, which includes finding ways of processing the data and improving transparent access to the information. There is no blueprint: the right mix of instruments will vary according to the country, the specific climate risks and the particular clients. To refine these insurance solutions and develop the market for them, functioning institutional structures need to be developed and cooperation between government institutions, private insurance and reinsurance companies, research institutions and possible clients must be improved. The workshop participants resolved to promote the exchange of information and experience in Latin America and the Caribbean and to organise further workshops on these issues in the region.

The workshop was one of four events organised as part of the Peruvian environment ministry's 'International Week of Climate Risk Management' in Lima.