Loss and Damage at the UN-FCCC, and risk transfer as part of the adaptation toolkit

1. Loss and Damage at the UN-FCCC, and risk transfer as part of the adaptation toolkit Dr Simon Young CEO, Caribbean Risk Managers Ltd Facility Supervisor, CCRIF

2. Loss & Damage • In UN-FCCC-speak, this refers to the segment of the negotiations focussed on managing the loss and damage which is increasingly occurring due to climate change • It includes two main areas, disaster risk reduction and risk transfer (insurance), and one other area, ‘rehabilitation’ or slow-onset damage • It is recognised that while most of the change in the climate is attributable to Annex 1 countries, it is the developing world which will bear the brunt of the economic and social costs of increased loss and damage • It is an area of the negotiations in which AOSIS and SIDS have been particularly active due to its recognised importance to the small island states of the world • However, one of the sticking points in a global deal on adaptation has been the creation of an ‘international insurance mechanism’ for climate change impacts, and also the linking of L&D to rehabilitation and compensation

3. Progress on L&D • In a compromise in Cancun, a work programme on L&D was mandated, to report back to CoP-18 with tangible, implementable ideas on how best to include DRR and insurance in an international climate change deal (with rehabilitation likely taking a back seat) • Ideas have been collated and will be formulated into a work programme under the Subsidiary Body for Implementation, one of two SBs under the Convention (the other being ‘Advice’), to be mandated (hopefully) in Bonn next month • Our region has been and will continue to be very active in this area, particularly because CCRIF has been seen and used as an example of how a regional insurance mechanism addressing catastrophe climate risks can actually work in practice

4. An economic framework for adaptation • A national economics of climate adaptation (ECA) assessment provides a quantitative foundation to development of a comprehensive, holistic adaptation strategy • ECA can be applied at various levels: • Overview and foundation for formulating the business case for adaptation investment at the country level • Drilling down to inform sectoral and project-specific design and implementation • However, the technical nature of the process requires a regional approach to champion the implementation of high-level studies and building of capacity to complete the drill-down work • Both CCRIF and ECLAC/CCCCC have been active in this area and CDB should play a coordinating and intermediating role to assist countries and the region to attract adaptation funding

5. How can ECA help?

6. An holistic adaptation strategy • Risk Management comes first: Disaster risk reduction is the top priority and the most cost-effective way to avert losses by reducing exposure • Risk Transfer can help: Risk reduction is only more cost-beneficial than risk transfer up to a point, and some risk, particularly catastrophe risk (which forms a substantial part of the region’s risk profile), cannot be adapted to • Residual Risk must be recognised and funded: Even with a perfectly executed adaptation strategy, some risk will remain; mainly long-term, slow-onset risk which will require some accumulation of funding to manage at the required time

7. Strategies to reduce climate risk • Increase infrastructure resilience (e.g. enhanced building codes, hardened coastal defences) • Develop new infrastructure to support changed lifestyles (e.g. drainage/irrigation networks for agriculture) • Enhance environmental protection mechanisms (e.g. coral reef preservation, mangrove restoration) • Support lifestyle changes to cope with a changed climate regime (e.g. changing agricultural practices/crops) • Include climate change in EIA alongside natural hazard risk assessment (championed by CDB) to help drive more climate-resilient development

8. Risk transfer as an adaptation tool • At the national level, risk transfer complements risk reduction in managing risks which cannot cost-efficiently be reduced • It can also provide a secure umbrella beneath which a risk reduction strategy can be fully implemented with lower chance of being negatively impacted by natural disasters • At the sub-national level, risk transfer products enhance access to credit for individuals and investors, which drives economic development, which in turn increases climate resilience • Index-based weather insurance has the ability to reach the poorest and most vulnerable in a fair and equitable way, something traditional insurance is not able to do

9. Risk transfer in action • CCRIF has paid out over $32 million in 4 years, including $17 million after Tomas, half dispersed within a week and the second half after 2 weeks • CCRIF is just about to launch a project funded by the German Environment Ministry, aimed at demonstrating the catalytic abilities of a regional risk pool such as CCRIF in creation of sub-national index insurance mechanisms serving the most vulnerable. One particular focus will be index-based weather insurance for the agricultural sector • A public-private partnership has recently been launched, supported by DFID, Swiss Development Agency and CDB (tbc) which offers an innovative insurance product to cover catastrophe risks for micro-finance borrowers • Known as MiCRO, the first product is in place and covering almost 50,000 MFI clients in Haiti against rain, wind and earthquake perils