Rahaman, M.
Shamsuddoha, M.
Iqbal, S.


Center for Participatory Research & Development-CPRD

Year of Publication:



Globally, the weather related extreme events and associated loss and damages (L&D) have increased significantly. With of high confidence, the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5) published in 2014 stated that the risks associated with those extreme weather events will further increase, putting disproportionate burden of climate stress and associated losses to the most vulnerable poor countries and communities. In the face of growing weather extremes and associated L&Ds, the global policy stakeholders at the UNFCCC negotiation have long been in discussion for agreeing a comprehensive ‘multi-window mechanism’ for addressing L&D, however the differentiated political position on the demand for ‘loss compensation’ from the historical liability context of the developed countries made the process considerably delayed. It’s only in 2007, the 13th Conference of the Parties (COP 13) of the UNFCCC included L&D as an agenda item, roughly 16 years later since the issue was first raised in 1991 at the 46th General Assembly of the United Nations. Over the years, the developed country group denied any discussion despite the L&D had started to manifest; they also had long been able to hinder any progress in L&D negotiations as they feared to be held liable for causing L&Ds and compensate those. Despite strong opposition of the developed countries, the negotiation on L&D got significant momentum since COP 13; however, major progress achieved at COP 21 where the country Parties included a stand-alone article in the Paris Agreement (PA), with the provision of enhanced action and support, and approaches e.g. risk reduction, risk sharing and risk transfer, and rehabilitation for addressing L&DS. Though, the pre-Paris COP negotiations emphasized for a comprehensive ‘all inclusive’ mechanism, the post-Paris COP negotiations provided utmost focus on a ‘all alone’ mechanism e.g. insurance for addressing L&D. For instance, among three different but interconnected approaches, climate risk sharing and risk transfer has become the priority concern with increased financial commitment and support primarily by the G7 and G20 country group who find ‘insurance’ apparently as an ultimate solution of addressing L&Ds. At COP 23 in 2017, the G20 countries launched their climate risk finance ‘the InsuResilience Global Partnership for Climate and Disaster Risk Finance’ also established a Multi-donor Trust Fund (MDTF) under the administering authority of the GFDRR/World Bank Group to implement the InsuResilience initiative. Despite the opportunities the climate risk insurance (CRI) provide, they are not appropriate for addressing longer-term foreseeable risks like sea-level rise and desertification, also the CRI may not cover the predictable L&Ds that the poor share-croppers and marginalized smallholders in the developing countries face almost in every year. There are less evidences that poor smallholders pay insurance premiums; it’s neither affordable by the smallholders, not justifiable to ask them to pay premiums. In many countries misconception on the risk transfer mechanisms exists, many of them still lack an appropriate regulatory framework for introducing CRI. In many places, people consider insurance as a mechanism that would deceive them, they also consider insurance too expensive. Therefore, CRI should not be considered as an ‘all alone’ solution as it has many structural limitations and setbacks. For instance, CRI could not be applied in transferring Executive Summary 04 | Risk Insurance in the Context of Climate Justice risks associated with the slow climate process (e.g. secondary and tertiary risks of climate change), also could not be applied on the loss of human lives. Insurance coverage on the loss of human life raises at least two moral concerns; a) human life is invaluable so it’s not ethical to put a price tag on humal life b) every human life is unique and equally significant; be s/he either rich or poor or from rich or poor countries, so differentiatied valuation of human life is also unethical. Given the stated scopes and limitations of CRI, this study report provides a theoretical analysis on the policy propositions and practices of insurance mechanism in transferring climate induced disaster losses, also summarizes a study findings on the readiness of Bangladesh’s insurance sector in the context of introducing CRI to protect climate sensitive production systems e.g. agriculture. This report includes 4 chapters; Chapter 1 summarizes nearly three decades of UNFCCC negotiation on L&D and provides an analysis regarding how the political standpoint (as well as Prejudice) of some of the country Parties promoted CRI as an ultimate choice for addressing L&Ds. Chapter 2 analyses insurance and other risk transfer mechanisms, summarizes benefits, challenges and limitations of the existing risk transfer mechanisms in the context of complicated risk scenario of climate change induced sudden, slow and unusual events; Chapter 3 analyses Bangladesh’s overall vulnerability to the impacts of climate change, briefly describes the L&Ds scenario and protection gaps, provides an overview on disaster risk financing and risk transfer practices; and, Chapter 4 summarizes a study findings on the readiness of the Bangladesh’s insurance sector for introducing CRI to transfer risk of disaster losses. While the study recognizes significant role of CRI in compensating/offsetting climate-induced disaster losses, however most of the insurance industries are found neither prepared nor even motivated to develop a new insurance scheme for transferring climate induced disaster losses from the country’s key sector e.g. agriculture. The study concludes with several recommendations in the context of introducing an effective and pro-poor CRI in Bangladesh.

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