NU Online News Service, Dec. 5, 2:00 p.m. EST

Recognizing the need for insurance-risk transfer in Caribbean states vulnerable to climate change, Munich Re says it has received permission to launch a program that provides insurance to workers and farmers most likely to suffer from hurricanes and floods in the region.

The Munich, Germany-based insurer says Germany's Federal Ministry for the Environment approved funding for a unique project to provide microinsurance and other risk-transfer solutions linked with disaster-risk reduction and risk management.

Under the program, €2 million ($2.69 million at the current exchange rate) will be devoted for a period of three years with the aims of overcoming obstacles by bringing Munich Re, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and specialist microinsurance broker MicroEnsure together under the umbrella of the Munich Climate Insurance Initiative (MCII).

Developing countries located in disaster-prone regions—such as the Caribbean—are particularly hard hit by the consequences of global climate change, making it even more difficult for vulnerable people in those countries to adapt to the increasing risk, says Munich Re.

The insurer says that, according to estimates from an Economics of Climate Adaptation study, losses caused by weather-related natural catastrophes already account for up to 6 percent of the annual gross national product in the five target countries—a figure that could increase by up to three percentage points by 2030, with hurricanes having the greatest loss potential in the region.

Underscoring the impact of climate change, The New York Times today reported carbon dioxide levels from burning fossil fuels had the highest percentage increase since 2003. Scientist believe that this continued trend “will make it difficult, if not impossible, to forestall severe climate change in coming decades,” according to the article.

Munich Re says weather risk insurance-related solutions—among them microinsurance—can play a key role in providing swift and non-bureaucratic recovery aid following major losses caused by natural catastrophes, and thus safeguard livelihoods.

However, the company continues, these approaches have had problems reaching large proportions of the vulnerable population due to a shortage of information on local weather risks, insufficient risk management and risk-transfer experience on the part of the initiators, and the lack of a clearly viable reinsurance concept.

Over the next three years, up to three different insurance products will be developed and marketed in at least three countries across the region, the company says, and their acceptability to and effect on the target group will be put to the test. A new aspect of these products will be a close association with risk-reduction measures.

MCII was launched by Munich Re in 2005 and has been involved in the United Nations climate negotiations since.

Special Reports /

Munich Re Forms Climate Change-Driven Microinsurance Program for Caribbean

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