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Is insurance “damage control” for climate change?

22 September 2010

Nero fiddled while Rome burnt, goes the legend. In the case of climate change driven by global warming, a similar scenario is frighteningly true of most of the world’s governments.

This was the message of a joint statement by over 100 insurance companies released in London on September 6.

There is a lot of talk, but little action on cutting greenhouse gas emissions, says Vanessa Otto-Mentz, head of the strategy unit at Santam, a signatory to the statement.

She explains that signatories to the statement are urging governments to recognise the huge benefits of using the insurance industry’s expertise to manage risks posed by climate change, particularly in developing countries.

It is in these countries, where insurance is out of most people’s reach, that natural disasters cause most suffering.

The recent floods in Pakistan provide evidence, with reinsurance broker Aon Benfield estimating damage at US$20bn, the “œvast majority” of which is uninsured.

The key role insurance can play is seen in initiatives such as that launched by the World Bank and the World Food Programme in Malawi, where 1000 small farmers have been granted loans to buy drought insurance. In India, state-owned insurers provide insurance to 20m farmers, an impressive number but still only 5% of the total of the country’s farmers.

It is now up to governments to grasp the hand of assistance being extended by insurers, says Otto-Mentz.

Read the full article at Financial Mail and and share your views in our Comments section below.