Writing the fine print: Developing regional insurance for climate change adaptation in the pacific

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CONTENTS I Introduction II Climate Change and Extreme Weather Events III Adaptation in the International Climate Regime IV Insurance and Adaptation in the International Climate Regime V Models for Climate Change Insurance VI Caribbean Catastrophe Risk Insurance Facility VII Climate Change Insurance and the Pacific Island States VIII Viability of Climate Insurance as a Long-Term Adaptation Strategy IX Conclusion I INTRODUCTION Many Small Island Developing States ('SIDS') lie only metres above sea level, making them particularly vulnerable to the impacts of climate change in both the shorter (eg storm surge during large tropical cyclones) and longer (eg sea level rise) terms. (1) The modest ambition for mitigation (ie reduction) (2) of greenhouse gas emissions in the United Nations Framework Convention on Climate Change ('UNFCCC'), (3) Kyoto Protocol (4) and Copenhagen Accord (5) means that the prospect of avoiding an increase in mean surface temperature of less than two degrees is now very low. (6) The latest climate science suggests the Earth is on a path that will lead to a rise in mean surface temperature of between three and six degrees by 2100. (7) Unless there is a significant reduction in greenhouse gas emissions over coming decades, SIDS are likely to experience tropical cyclones of greater severity, disrupted rainfall patterns and sea level rise. (8) Recent extreme weather events in the Asia-Pacific region, such as Typhoon Haiyan (9) and Cyclone Ian, (10) demonstrate the significant impact of these events on SIDS. (11) The lack of success in mitigating greenhouse gas emissions has led to adaptation to climate change impacts gaining greater prominence within the United Nations climate negotiations. Adaptation to climate change has been defined as '[a]djustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities'. (12) Adaptation may take many forms, including pre-emptive action to limit damage from climate change-related events (eg implementing more ambitious building codes to make buildings more resilient to storms) and building institutions to aid recovery after a climate-related event (eg improving emergency services capacity to respond in the immediate aftermath of adverse weather events). Domestically, insurance is an established mechanism to spread financial risk of adverse events and build societal resilience. However, at an international level, the issue of climate change-related insurance has only proceeded in fits and starts. Proposals for an insurance mechanism to support the adaptation of SIDS to climate change date back to 1991. At that time, the Alliance of Small Island States ('AOSIS') proposed an international, state-based pool to provide insurance against the impacts of climate change-related sea-level rise. (13) Despite this early call by AOSIS, a climate change-related insurance mechanism was not included in either the UNFCCC or the Kyoto Protocol. In 2007 climate change-related insurance emerged again on the UNFCCC agenda as the Bali Action Plan launched international discussion on enhanced action on adaptation 'including risk sharing and transfer mechanisms such as insurance'. (14) In 2008 AOSIS made a submission under the Bali Action Plan to include an insurance mechanism as part of a broader response to climate-related loss and damage. (15) In a departure from its earlier proposal in 1991, the 2008 AOSIS submission called for insurance cover for climate change-related extreme weather events such as hurricanes, floods and droughts. (16) In 2010 the Cancun Agreements also invited submissions on the development of a climate risk insurance facility, as a part of an enhanced adaptation framework, to address impacts from extreme weather events. (17) The 2012 Conference of the Parties ('COP') 18 meeting in Doha appeared to be a breakthrough in the development of institutions to assist adaptation to climate change. …