17th Consultative Forum on Inclusive Insurance: Key Messages
“Climate and disaster risk: building resilience, bridging the protection gap in Asia”
4 November 2019, Dhaka Bangladesh
Hosted by the Bangladesh Insurance Association (BIA) and Munich Re Foundation alongside the 15th International Conference on Inclusive Insurance
From relief to preparedness: including insurance in disaster risk management strategies
Key messages from IAIS-A2ii-MiN-InsuResilience Global Partnership Consultative Forum in Bangladesh
Climate change is increasing the already-massive impact natural disasters have on the poor and vulnerable. Insurance as part of an integrated risk management package can play a vital role in building greater resilience and protecting individuals and communities; however, it is currently falling short, and there remains a significant insurance protection gap to address.
According to Munich Re, only half of the global losses resulting from catastrophes in 2018 were insured. The situation is even worse when looking at just emerging and developing countries – there are regions where the gap exceeds 90%. Asia is particularly prone to natural disasters, registering the highest frequency of such events of any continent, accounting for 43% of all events worldwide and for 74% of fatalities related to these events in 2018. Overall losses came to US$ 59bn1. Nowhere is this more true than in Bangladesh, one of the most disaster-prone locations in the world largely due to its monsoonal climate and coastal morphology. A 2017 study published in the STM Journal reports that since 1972 the country has experienced a total of 297 climate and geo-physical disasters with flood and storm being the most common events. The same study reports that approximately 230,000 people have lost their lives as a result of these catastrophes.
On 4 November, around 60 insurance regulators and supervisors, policymakers, insurers, reinsurers, brokers, climate change experts, aggregators, and international development professionals put their heads together in Dhaka, Bangladesh to address two key questions: what are the roles and responsibilities of each stakeholder to reduce the protection gap in climate risk insurance? What are the urgent steps that they have to adopt to make this happen?
During the event, both industry as well as public sector representatives discussed current approaches and challenges they face in implementing these solutions.
The insurance sector plays a crucial role in protecting and mitigating the impact of climate change. However, insurance is only one building block of a comprehensive disaster risk management framework. Considering this, the World Food Programme’s R4 program, an integrated microinsurance approach, includes not only insurance for assets, but also risk reduction and risk transfer mechanisms. A key success factor in implementing a programme like R4 is the buy-in and understanding of local stakeholders as well as long-term investment in consumer awareness. CARD Pioneer offers different products to help protect individuals against climate risk in the Philippines. Not only does this contribute to building longer-term resilience at the individual household level, it also strengthens independence from international aid. However, lack of data and pricing are key challenges for CARD Pioneer, especially because of the huge discrepancy in taxes for life – 2.3% – and non-life – 25-27% – insurance products.
Along with the private sector, the public sector can contribute to more resilient societies by ensuring political support and recognising the important role governments can play. This does not only include the provision of subsidies. In Bangladesh for example, part of a recent paradigm shift from disaster relief to preparedness is the current revision of disaster risk management policy documents to ensure insurance is explicitly included. However, among 46 insurance companies in the country, only one, Green Delta, is currently working on climate risks. CIMA, the Inter-African Conference of Insurance Markets in West Africa, is currently drafting a climate strategy to ensure supervisors are more involved in climate-related topics, including issues like consumer education, reporting and disclosure, scenario analyses as well as a test-and-learn approach to the approval of new products and schemes in the climate context. Some risks individuals face in the context of climate change may also call for governments to consider more mandatory insurance products to be included in regulatory frameworks.
The protection gap is still huge; further improved coordination and collaboration between the public and private sectors is therefore needed.
The Forum was jointly organized by the International Association of Insurance Supervisors (IAIS), Access to Insurance Initiative (A2ii), Microinsurance Network (MiN) and InsuResilience Global Partnership, and hosted by the Bangladesh Insurance Association (BIA) and Munich Re Foundation.
Written by the Access to Insurance Initiative and the Microinsurance Network