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" Insurance as an adaptation strategy for extreme weather events in developing countries and economies in transition "
Mills, Evan
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AL
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| Record Number
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901047
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LA5609x12n
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| Title & Author
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Insurance as an adaptation strategy for extreme weather events in developing countries and economies in transition [Article]\ Mills, Evan
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| Date
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2004
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| Abstract
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The insurance industry can play a material role in decreasing the vulnerability of developing countries and economies in transition to weather-related natural disasters while simultaneously supporting both its own market-based objectives and the objectives of sustainable development. Although insurance is not a "silver bullet" for the problems posed by natural disasters in emerging markets, public-private partnerships can enhance insurance's ability to spread the risks and manage the costs of weather-related disasters as well as to increase the pool of people who have access to coverage. (For simplicity in this report, the phrase "emerging markets" is intended to encompass developing countries and economies in transition.) Promising strategies for emerging markets involve establishing innovative products and systems for delivering insurance and using technologies and practices that both reduce vulnerability to disaster-related insurance losses and support sustainable development (including reducing greenhouse gas emissions). These strategies can enhance sustainable development efforts and increase the insurability of risks, making insurance markets in emerging markets more viable. Emerging markets are especially vulnerable to extreme weather events, which impede development by causing physical damage, compromising human and ecosystem health, diverting scarce resources to disaster relief and recovery, and deterring future investment and insurance availability by amplifying the risks faced by foreign interests. An average of 300 million people are affected or killed each year by weather-related disasters in emerging markets. Characteristics of emerging markets contributing to their particular vulnerability in contrast to developed nations include: greater frequency of poverty; weaker lifelines (transportation, communication, utilities, emergency response, and hospitals); poorer quality of construction and absence of or deficiencies in building codes and other regulations; and high dependence on resource-based industries (e.g., agriculture). Natural disasters such as drought often dislocate large groups of people, amplifying their vulnerability to future disasters. Development itself can compound these vulnerabilities by promoting population growth, urbanization, intensive coastal development, and concentrations of climate-sensitive physical and health-related hazards. With its pool of financial reserves, the global insurance market provides considerable adaptive capacity for weather-related damage to property, life, and health. The global insurance market--perhaps the world's largest industry--represented
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