NU Online News Service, Sept. 20, 1:10 p.m. EDT
A report on how risk transfer can aid developing nations in accessing finances when a natural disaster strikes was released by Swiss Re to help kick off "Climate Week NY?C."
The 16-page report released today, titled "Weathering climate change: insurance solutions for more resilient communities," (//media.swissre.com/documents/A10485_Climate_adaption_Publication_A4.pdf) examines "how risk transfer measures help societies adapt to climate change and minimize the financial impact of large natural disasters," the insurer said in a statement.
As natural hazards and extreme weather take hundreds of lives and cause billions of dollars in damage every year, climate change "could severely exacerbate the impact of such disasters, wiping out years of development gains and costing some countries up to 19 percent of annual GDP by 2030," the company said.
Cost-effective adaptation measures can mitigate potential loss by more than 90 percent in some cases, Swiss Re said. Because many decision-makers have to make investments in the face of uncertainty and limited funds, insurance can be a cost-effective way of coping with the financial impact of severe weather events, the company said.
One major challenge is extending adequate coverage to poor communities where there is not "a mature local insurance market," Swiss Re said.
However, new forms of risk transfer are being developed to deal with these issues. As an example, Swiss Re noted the Caribbean Catastrophe Risk Insurance Facility, a multination risk pool supported by Swiss Re. The program combines traditional insurance and capital market instruments. The program also provides catastrophe insurance for hurricane events to 16 Caribbean governments by providing rapid access to financing.
"Insurance is an effective method to finance the costs of climate-related disasters," said Matthias Weber, Swiss Re's division head of property and specialty. "It is most effective when viewed as an integral part of a much broader climate adaptation strategy."
As part of its commitment to the Clinton Global Initiative, Swiss Re said it is working with Oxfam America and local partners in Ethiopia to provide weather insurance to poor farmers.
"We are committed to using our capabilities in designing financial solutions that support the transition to a low-carbon economy and help societies adapt to the unavoidable consequences of climate change," said Raj Singh, Swiss Re's chief risk officer.
Steve Howard, founder and chief executive officer of the Climate Group, said, "We are delighted that Swiss Re is supporting Climate Week NY?C (http://www.climateweeknyc2010.org/about for the second year running."
He added, "Recognizing the full impact that climate change could have on all areas of our global economy, they act as a leading example of how the finance industry can restructure products and services, not only to help us adapt to these consequences but to unlock private sector finance for a clean industrial revolution."
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