Launch of InsuRisk Report: Disaster Risk and Readiness for Insurance Solutions in Small Island Developing States
Small Island Developing States (SIDS) face extraordinarily high risks from climate change hazards. Climate-related extreme events and natural hazards (e.g. tropical cyclones and storms, storm surges, floods, droughts and earthquakes) impose a heavy burden on vulnerable communities, marine and terrestrial ecosystems, livelihoods, major economic sectors and national budgets. They also impede sustainable development in many small islands, including SIDS.
It is crucial to understand and address the needs and the diverse risk environment of SIDS in order to provide Climate and Disaster Risk Finance and Insurance (CDRFI) solutions that are well-tailored to needs. The basis for such a thorough needs assessment lies in the accessibility and reliability of climate-risk data. However, this data is still scarce in the most vulnerable countries.
The latest InsuRisk Special Report aims to give deeper insights into current environmental and development challenges, alongside needs for CDRFI instruments in SIDS and their status. The report offers transparent and comparable baseline information on countries’ climate and disaster risks and their readiness to accept risk transfer through insurance solutions. The nuanced knowledge gains provided in this report can also guide and focus the international community as it seeks to identify where the strongest needs are located and where coping capacity needs to be enhanced.
Key findings of the report feature:
- Information on climate and disaster risk at national resolution as presented in this report is useful for providing a better understanding of the differences and similarities across SIDS. This permits identification of priority countries and ensures that certain high-risk SIDS do not fall under the radar. However, assessments at the sub-national and local scales are needed to enhance capture of the spatial variability of risk and inform targeted risk reduction and adaptation.
- Lack of current, publicly available, high-resolution data remains a challenge for many SIDS. Greater efforts are needed to systematically collect, manage, and provide relevant data and information on natural-hazards vulnerability, climate and disaster risk, and the development status of insurance markets.
- The perception of SIDS as “hotspots of climate change” that share a “common vulnerability to climate change” does not reflect the reality given that SIDS form a highly diverse and heterogeneous group of countries with varying levels of exposure and vulnerability to natural hazards.
- SIDS governments face specific challenges accessing and facilitating access to insurance solutions given their small geographic and market size. This makes insurance either unaffordable or unavailable as small countries often represent an unattractive proposition for the private sector. Regional approaches can help countries to access sovereign risk insurance that is appropriate to their needs. Such regional approaches may also be appropriate for increasing access to microinsurance for extreme weather through streamlining regulation and consumer education.
The InsuRisk Assessment Tool
The United Nations University – Institute for Environment and Human Security (UNU-EHS) and venture philanthropy fund Social Impact Partners (SIP) commissioned an initial study in 2017 for developing a comprehensive concept, methodology and tool that provides transparent and comparable baseline information on countries’ climate and disaster risks, and their readiness for risk transfer through insurance solutions.
The resulting InsuRisk Assessment Tool has been designed to provide answers to the following questions:
- What is the level of exposure, vulnerability and climate/disaster risk of a country?
- What is a country’s readiness to accommodate insurance solutions?
In order to provide answers to these questions, the InsuRisk Assessment Tool comprises two key components: (i) climate and disaster risk and (ii) readiness for insurance solutions. The InsuRisk Assessment Tool does not indicate when a country might be affected by a disaster. However, it highlights the risk of being confronted with adverse impacts associated with climate-related and natural hazards.
More information on the InsuRisk Assessment Tool can be found in the full report.