MR Microinsurance_2012_03_29.indd - International Labour ...

86 Emerging issues
In many regions, global warming will alter the frequency and intensity of
weather events. This is particularly clear in the case of tropical cyclones. For
example, warmer sea surfaces can lead to the development of more intense tropical
cyclones as these storm systems draw their energy from warmer water. If areas
with sea surface temperatures above 27°C expand, new risk zones for cyclones
will be created. The appearance of cyclones off the coasts of Brazil (2004) and
Spain (2005) are evidence that the range of the risk is changing in the wake of
global warming.
4.1.2 Classes of business affected
The climate cannot be insured. It is also impossible to insure all the effects
associated with global warming. This is true of both traditional and microinsurance.
The melting of glaciers or the accelerated rise in sea level cannot be insured based on
the insurance principles of unpredictability, calculability and sudden occurrence.
However, some effects of climate change, such as floods or even droughts, are
insurable.
When discussing insurance and climate change, one often means the insurance
of weather-related catastrophes, which are very likely to increase in the
future. Natural catastrophes can be particularly detrimental to microinsurance
portfolios, as small or regionally focused portfolios can be devastated by a major
natural disaster. Natural hazards, such as the wave of flooding in Pakistan in 2010
or Cyclone Nargis in Myanmar in 2007 that devastated huge areas, have to be
taken seriously in microinsurance.
The impact of climate change also affects other insurance business lines, as
summarized in Table 4.2. The biggest correlation between weather and losses is in
agriculture insurance, as discussed in detail later in the chapter. However, hundreds
of thousands of people might die or be injured in extreme weather events,
so there is also an impact on health and life insurance. Buildings or their contents
can also be affected by weather events. Cyclones (in Southern India in 2008) and
typhoons (in the Philippines in 2010) have shown that a weather disaster can be a
challenge for property and buildings microinsurance covers, which are often not
developed for weather events, let alone climate change.
While natural disasters are certainly the most urgent threat, changing climatic
conditions will also have more subtle, long-term effects. Gradual increases in
temperature, for example, can affect germination periods or determine which
crops can be grown in certain regions. They also will affect mortality and
morbidity, by changing the ranges of different diseases or creating the conditions
for new ones.