Microinsurance: One possible option

The idea of developing insurance-related solutions to the effects of climate change was first conceived in 1991 by the Alliance of Small Island States (AOSIS), which proposed the establishment of a fund financed by the industrialised countries. Article 4.8 of the United Nations Framework Convention on Climate Change (UNFCCC) and Article 3.14 of the Kyoto Protocol both call on the industrialised countries to develop measures which will enable developing countries to react to climate change. Insurance is mentioned as a possible option.

However, a look at the insurance penetration shows that access to insurance varies greatly around the world today. Covers for catastrophic events are still scarcely available in Africa, Asia, and Latin America. Of the four billion people worldwide who have less than two dollars a day at their disposal, only ten million are able to purchase insurance.

There are three essential reasons for this. Firstly, many people are unable to afford insurance on account of their low income. Secondly, the infrastructure needed to give the people requiring protection access to insurance is frequently lacking, especially in rural areas. And thirdly, the concept of insurance and the principle of solidarity underlying it are virtually unknown in some cultures.

Successful start has been made

Microinsurance can play an important part in overcoming these hurdles, and a successful start has already been made in agricultural insurance and in the life and health sector. Weather insurance based on rainfall indices are currently being developed, for example. The cover attaches if the rainfall drops below a certain level within a given period of time. In this way, farmers can protect themselves against the effects of drought — which may in turn be a result of climate change.

The MCII first unveiled its ideas on such insurance solutions at the 2005 Climate Conference in Montreal. This autumn, five fundamental papers on different aspects of MCII's activities will be published in cooperation with the reputed journal Climate Policy.

The first step has been taken, but there is still a long way to go before large parts of the world's population will be able to insure themselves against the effects of climate change. The pace adopted by those concerned will be just as important as choosing the right path. The MCII will help them.

« back  |  continue »