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Insurance for climate damage

By Nic Maclellan

ONE of the more contentious debates
at this year’s Pacific Islands Forum
involved a proposal from Tuvalu for a
Pacific Islands Climate Change Insurance
Facility (PICCIF).
There is concern amongst some CROP
agencies like the Secretariat of the
Pacific Community (SPC) that Tuvalu’s
new initiative will duplicate existing
programs, such as the Pacific Catastro-
phe Risk Assessment and Financing
Initiative (PCRAFI). Tuvalu PM Enele Sopoaga (right pictured with Cooks PM Henry Puna at the forum) has proposed a climate
But Tuvalu Prime Minister Enele change insurance facility. Photo: Nic
Sopoaga told Islands Business that the of disaster risk reduction. PCRAFI deals risk to their own investments.”
proposal should not cause controversy. with natural disasters, earthquakes, Article 8 of the 2015 Paris Agreement
“This is something provided for in the tsunamis, but we want to have a specifi- on Climate Change recognises “the im-
Paris Agreement,” he said. “We simply cally targeted program towards climate portance of averting, minimising and
want to walk the talk of the agreement. change impacts. Cyclones now have got addressing loss and damage associ-
It’s difficult because there are other a human signal in them, we want to ated with the adverse effects of climate
insurance schemes, but mainly under deal with ocean acidification, droughts, change, including extreme weather
the Sendai Framework for Disaster Risk floods and all these climate change re- events and slow onset events.” But
Reduction. That’s okay - these processes lated matters.” later provisions of the Paris Treaty also
can run in parallel and complement each “In a first step, it would be around recognise that “Article 8 of the Agree-
other.” catastrophe-related climate change ment does not involve or provide a basis
PCRAFI is a joint initiative of the SPC, impacts,” he added. “We also want to for any liability or compensation.”
the World Bank and Asian Development have a clearinghouse so countries can Some OECD countries are concerned
Bank. It receives major funding from identify particular insurance products that their delay in reducing greenhouse
Japan, the Global Facility for Disaster that suit their needs around climate gas emissions will open them up for ma-
Reduction and Recovery (GFDRR) and change impacts. So there might be spe- jor compensation claims from developing
the ACP-EU natural disaster fund. cial products for the tourism industry, nations. But Ambassador Fry argues
A PCRAFI Facility was officially es- fisheries et cetera.” that the PICCIF scheme can reduce this
tablished in the Cook Islands in June The Cook Islands-based PCRAFI concern.
2016. It includes an insurance pool, in Facility involves reinsurance schemes “There’s still a fear from some coun-
order to deliver quick injections of cash provided by major insurance firms such tries that this is connected to loss and
to governments immediately after eli- as Sompo Japan Nipponkoa Insurance, damage and liability for compensation,”
gible disasters. It also involves disaster Mitsui Sumitomo Insurance, Tokio Ma- he said. “What we are saying is quite the
risk assessment tools and financing rine & Nichido Fire Insurance, Swiss Re, opposite. If we can have a rational ap-
solutions, aiming to provide “integrated and Munich Re. But Tuvalu’s proposal proach to countries rebuilding after the
financial solutions for the reduction of for PICCIF might also include an industry effects of climate change, then the need
their financial vulnerability to natural monitoring component. for pursuing other avenues like loss and
disasters and to climate change.” Ambassador Ian Fry said: “The insur- damage compensation diminish.”
The Facility has issued its first insur- ance and reinsurance industry has huge In their final communiqué in Apia,
ance policies to Cook Islands, Marshall investments worldwide in a variety of Forum leaders agreed to establish a
Islands, Tonga, Samoa and Vanuatu, industries, and some of that is in the task force to further study the climate
providing coverage of US$38.2million fossil fuel industry. We should set up a insurance facility.
against tropical cyclones, earthquakes monitoring system to see if they can im- Coordinated by the Forum Secre-
and tsunamis. prove their investments and be climate tariat, the task force will report back to
Tuvalu’s Ambassador for Climate friendly. The French insurance company next year’s Forum Economic Ministers
Change and the Environment Ian Fry Axa has now developed a policy of Meeting (FTMM) and the 2018 leaders
believes the new PICCIF scheme would withdrawing from their investment in meeting in Nauru. But watch this space
be more tightly targeted. fossil fuel. - over the next year there will be exten-
“We want this facility to directly ad- “The other key issue is that they have sive debate amongst the CROP agencies
dress climate change impacts,” Fry told investments in highly vulnerable areas about assurance, insurance and who will
Islands Business. “Some countries are that are going to be subject to the effects pay the bills for climate change damage.
locked into PCRAFI like Japan because of climate change. We say they should r nicmac3056@gmail.com
it’s based around the Sendai program be looking at that as well, because of the

Islands Business, October 2017 17