MR Microinsurance_2012_03_29.indd - International Labour ...

4 Microinsurance and climate change
Thomas Loster and Dirk Reinhard
The authors would like to thank Joachim Herbold of Munich Re, Karlijn Morsink from the University
of Twente, Birgit Schubert from Albert Ludwig University, and David Saunders from the ILO for their
contributions to this chapter. They also wish to thank Asif Dowla (St Mary’s College), Thomas Mahl
(Munich Re), Alexandra Michailescu (Credit Suisse), Dan Osgood (IRI), Rupalee Ruchismita (CIRM)
and Roland Steinmann (MicroInsurance Centre) for their comments.
The year 2010 went down in history, along with 2005 and 1998, as the warmest
year since instrumental climate records were introduced, with new record high
temperatures being regularly recorded all over the world (WMO, 2010). According
to the Intergovernmental Panel on Climate Change (IPCC), over the next
100 years the mean temperature of the atmosphere is set to increase significantly,
by up to 6.4°C in the worst-case scenario, with higher sea levels and an exacerbation
of weather extremes (IPCC, 2007, 2011).
The loss statistics of insurers and evidence emerging from experts, including
the Centre for Research on the Epidemiology of Disasters (CRED), are already
showing strong trends indicating that global warming will lead to risk situations
deteriorating in many parts of the world, especially developing countries. Data
for natural catastrophes since 1980 show that more than 80 per cent of fatalities
caused by weather-related disasters were in developing and newly industrializing
countries. 1 Within developing countries, poorer regions are particularly at risk
due to weak infrastructure. For example, the poor often live in sub-standard
housing in exposed locations, such as on the margins of settlements where they
are vulnerable to flash floods, landslides or storm surges.
The insurance of natural hazards is a particular challenge for insurance companies
because of the exposure to major damage (Swiss Re, 2010a). Natural
events often affect huge areas and can devastate thousands of square kilometres of
land. This quickly leads to an accumulation of losses and possible solvency problems
for insurers.
Microinsurance is also vulnerable to natural disasters and must acknowledge
the risks associated with them. Although earthquakes have had a major impact on
some microinsurance schemes, such as Alternative Insurance Company (AIC) in
Haiti in 2010 and India’s VimoSEWA in 2001, this chapter focuses on disasters
that are becoming more frequent and more powerful due to climate change. An
example of this was Cyclone Nisha, which hit India in November 2008 and
required Bajaj Allianz to settle some 16 000 microinsurance claims (Kunzemann,
2010).
1 See, for example, CRED (EM-DAT), Swiss Re’s Sigma or the Munich Re NatCatSERVICE.
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