New publication shows index insurance has potential to help manage climate risks and reduce poverty
June 24/Geneva — Climate has always presented a challenge to farmers, herders, fishermen and others whose livelihoods are closely linked to their environment, particularly those in poor areas of the world. A type of insurance, called index insurance, now offers significant opportunities as a climate-risk management tool in developing countries, according to a new publication launched today during a workshop at the Global Humanitarian Forum (GHF) in Geneva. The report, called Index Insurance and Climate Risk: Prospects for development and disaster management is part of the Climate and Society series produced by the International Research Institute for Climate and Society (IRI). The IRI published the report in partnership with the United Nations Development Programme, the International Fund for Agricultural Development, Oxfam America, Swiss Re, the US National Oceanic and Atmospheric Administration and the World Food Programme.
"As an innovation, index insurance may hold answers for some of the more obstinate problems faced by the poor and the vulnerable," writes GHF President Kofi Annan in the report’s foreword. "I hope this publication will help us to appreciate how much has been learned over the last few years, and show us where we can usefully concentrate our collective efforts."
For poor people, a variable and unpredictable climate can critically restrict livelihood options and limit development. For example, banks are unlikely to lend to farmers if they think a drought will cause widespread defaults, even if the farmers could pay back loans in most years. The farmers’ lack of access to credit limits their ability to buy improved seeds, fertilizers and other inputs.