Representatives of the insurance sector, the United Nations, and the World Bank have created the international Insurance Development Forum (IDF) in an effort to share the industry’s risk measurement expertise with governments in developing countries to strengthen their existing disaster risk reduction and resilience frameworks.
The forum will facilitate the co-ordination of activities, mobilisation of collective resources, and development of strategic and operational relationships between governments, industry, and international institutions.
It will be led by a steering group comprised of insurance industry leaders and representatives of governmental institutions. The steering group will be supported by an executive secretariat based at the International Insurance Society (IIS).
A set of initial priorities for action were agreed at a recent meeting, including:
- Use the sector’s expertise to promote a better understanding of hazards, quantify the risks, and anticipate the potential impacts of natural disaster and climate change. This knowledge will help governments and communities make informed decisions on resilience, insurance, investment, and wider policies.
- Facilitate the availability of climate and natural hazard risk-sharing facilities in most regions.
- Promote regulations and policies that facilitate access to insurance among the most vulnerable.
- Identify and address challenges to wider insurance coverage. In the developing world, more than 90% of the economic costs of natural disasters are uninsured, according to the IDF.
- Support capacity-building initiatives that enable developing countries to manage and implement sustainable financing and resilient investment from insurance and related sectors.
- Support the creation of the Global Adaptation and Resilience Fund to invest in resilience-related technologies, innovation, and facilities.
“Insurers’ risk management skills help us assess natural disaster risk and can be exported to allow governments at all levels to reduce future losses by designing in resilience into infrastructure projects; and in increasing the use of insurance as a pre-disaster economic resource to allow people to protect their families, property, and assets,” IDF Chair Stephen Catlin said in a news release. “These skills can increase the utilisation of insurance, which will reduce the reliance on post-disaster aid and better target resources to the most important and needed humanitarian crises. Research has shown that a 1% increase in insurance penetration can reduce the disaster recovery burden on taxpayers by 22%.”
A challenge to the sector
The opportunity the insurance industry has to play a critical role in building natural disaster resilience was underlined by UN Secretary-General Ban Ki-moon in a statement in New York City on April 13th. At the sector’s high-level meeting on resilience, Ban reminded participants of the urgent need to take action against climate change, given that it could cause them to “be faced with mounting claims of a magnitude not yet seen,” and issued several challenges to insurers. Among them:
- Decarbonise investment portfolios. Addressing the CEOs present at the meeting, Ban said, “It is not enough to simply create new products to respond to climate catastrophes. You must also decarbonise your investments so they do not contribute to rising greenhouse emissions.” Given the scale of the investment portfolios held by major insurance companies (an estimated $25 trillion, according to the speech), Ban reminded insurers that their investment decisions have an impact on climate change and called for responsible investment to reduce the rise in carbon emissions and protect against the financial disruption caused by stranded assets. He also urged the sector to double its investments in clean, sustainable energy by 2020.
- Work with the UN to ensure that early warnings and early actions are made available to the most vulnerable countries by 2020. “Economic losses from natural disasters are now estimated to exceed $300 billion per year. This century, more than 1 million people have already lost their lives to disasters. We need to move from managing disasters to managing and reducing risks,” Ban said.
- Develop auditable standards that incorporate sustainable development goals.
—Samantha White (email@example.com) is a CGMA Magazine senior editor.