Home » Posts tagged 'Loss and Damage'

Tag Archives: Loss and Damage

Public-Private Insurance Partnerships Bolster Latin American/Caribbean Resilience

Globally, three of the ten most costly natural disaster events in the last 35 years occurred in total or in part in the Latin America/Caribbean (LAC) region; losses from Hurricane Matthew in the Caribbean are still being assessed.

Today, 80 percent of the LAC population lives in urban areas, second only to North America (82 percent) and well above the global average of 54 percent. The region’s 198 large cities (>200,000 residents) contribute over 60 percent of gross domestic product (GDP), and its 10 largest cities produce 50 percent of that total. As the region’s population, swelling middle class, urbanization and GDP concentration continue to grow, the effects of climate volatility will likely increase the impact of natural perils losses on these economies.

Damage from these losses as a proportion of GDP tends to be much higher than in developed economies (see tables 1 and 2). If the LAC region is to build on the economic and social gains of recent years, its governments must align with the private sector through public–private partnerships to improve risk management and disaster preparedness strategies.

The ultimate cost of catastrophe-event responses puts particular strain on the public balance sheets of emerging markets, increasing public debt and ultimately burdening taxpayers. Adding to the problem is the lack of insurance coverage in developing countries. Average property insurance penetration in developing countries was only 0.21 percent in 2014, compared to 0.77 percent in industrialized countries. Another estimate indicates only 3 percent of potential loss is currently insured in developing countries versus 45 percent in developed countries. Mature economies can also often fall back on fiscal safety nets to cover insurance shortfalls. The $83 billion budget appropriation approved by the U.S. Congress after Hurricane Katrina hardly registered on the U.S. budget, but most developing economies cannot afford such amounts. For example, a year after Hurricane Ivan hit Grenada in 2004, the country defaulted on its foreign debt.

The Maule, Chile earthquake of 2010 burdened the country with $32 million in economic losses, or 15.1 percent of GDP. Despite the high level of insurance coverage in Chile—even by developed world standards—75 percent of the costs were ultimately assumed by the government, leaving significant opportunity for the private sector to reduce the state’s financial burden.

Many recent catastrophe events in the Latin America/Caribbean region provide examples of the protection gap: Only 5 percent of the $8 billion economic loss from Haiti’s 2010 earthquake was insured; and the insured portion of the $2-3 billion economic loss caused by the April 2016 earthquake in Manta, Ecuador, is expected to reach no more than 15 percent. The 2016 earthquake has deeply impacted the local economy and government finances as unemployment increased by approximately 50 percent and the government was compelled to increase sales taxes by two percent to fund national reparation and recovery costs. In general, emerging markets face a much larger protection gap than developed economies:

Given the overall impact of catastrophes on public-sector finances, governments in Latin America are transitioning from an over-reliance on post-event disaster financing to a pre-event approach to disaster risk mitigation. Societies are realizing that transferring risk to the private sector provides efficient and cost-effective solutions that relieve already strained public-sector budgets.

The insurance industry also empowers the mechanisms and innovation needed to “build back better.” This concept relies on three key ideas—risk reduction, community recovery and implementation—to increase community resiliency. By improving building codes and land-use planning, cities can reduce the future vulnerability of their physical infrastructure. At the same time, social and economic recovery is supported through market-based incentives and subsidies to finance aid and reconstruction efforts. Finally, stakeholder education, legislation, regulation, community consultation and monitoring and evaluation must all be used to ensure compliance with appropriate and culturally sensitive standards and targets.

“Building back better” institutionalizes disaster assessment and recovery frameworks at the national, municipal and community levels as well as in the private sector, academia and civil organizations, improving coordination and risk governance. Sharing regional and global best practices and establishing international aid standards further supports sustainable recovery and reconstruction.

A Lesson in Resilience from Mexico

The Mexican federal government’s risk management strategy exemplifies a modern, resilient disaster preparedness plan, including pre- and post-event approaches and public–private partnerships. Following the 1985 Mexico City earthquake, the Mexican National Civil Protection System (SINAPROC) was created, establishing a multi-level system to integrate stakeholders from the three levels of government, the private and social sectors, academia and scientific organizations. Its purpose was to provide an institutional framework for the improved coordination of emergency response. Its capacities in the areas of risk assessment, early warning, preparedness and disaster risk financing were developed. As SINAPROC evolved, it added risk reduction practices to shift from a reactive to a preventative, holistic and integrated risk management plan.

Recognizing that risk comes from multiple factors—politics, land-use planning, cultural norms, and more—SINAPROC mainstreamed the plan throughout government, private and social sectors. Through the Secretariat of the Interior, it coordinates civil protection with other key policies, such as urban development, housing, climate change and education, by clearly identifying responsibilities. SINAPROC works with the Secretariat of National Defense and the Secretariat of the Navy to implement emergency preparedness, communication and relief and recovery plans in addition to creating institutions to set policies and budgets, develop best practices, coordinate government, promote social and private-sector agreements and research scientific and technological improvements in risk management. It also aligns with the Ministry of Foreign Affairs to oversee international compliance and assistance and establishes provisions for government accountability.

SINAPROC also created the General Risk Management Directorate to oversee financial risk management instruments in conjunction with private-sector stakeholders. One such instrument was developed in 1996 to respond to a continued need for post-event budget allocations. The Fund for Natural Disasters (FONDEN) is a transparent financial vehicle by which the federal government provides pre-event funding from tax revenues for post-disaster response and reconstruction. Its resources are allocated by law, and distributions are made by the state-owned development bank from sub-accounts dedicated to specific reconstruction programs.

Through FONDEN, the Mexican government established relationships with international capital and reinsurance markets that have proven critical in accessing risk transfer schemes. In 2006 it purchased Mexico’s first catastrophe bond, Cat Mex. In 2009, it replaced Cat Mex with the MultiCat Mexico bond, expanding earthquake coverage and adding hurricane coverage. The bond was renewed again in 2012 before making a $50 million payment to the Mexican government for losses from 2015’s Hurricane Patricia. SINAPROC further mitigated the storm’s impact by using its early warning system to evacuate most of the affected population, resulting in only a handful of casualties despite the fact that Patricia was the second-most intense tropical cyclone on record.

In 2011, FONDEN also placed a traditional insurance program covering 100 percent of the federal government’s assets. To incentivize prevention, it covers up to 50 percent of provincial assets if municipalities implement formal risk transfer strategies. The program renewed in 2012 with over 40 international reinsurers and demonstrated considerable buying power by convincing the market to accept its own damage assessment and adjustment procedures.

Mexico’s risk management strategy has earned a strong reputation in the international community. The World Bank said it is “at the vanguard of initiatives aimed at the development of an integrated disaster risk management framework, including the effective use of risk financing and insurance mechanisms to manage the fiscal risk derived from disasters,” highlighting it as an example for other governments to follow.

Another market leader in public–private partnerships, CCRIF SPC(formerly the Caribbean Catastrophe Risk Insurance Facility) is the world’s first multi-country-risk-pool-utilizing parametric insurance backed by both traditional insurers and capital markets. Created in 2007 with the support of the World Bank, the government of Japan, and other donors, CCRIF provides protection against earthquakes, hurricanes, and excessive rainfall to 17 Caribbean and Central American countries. Leveraging its diverse portfolio, the facility provides affordable reinsurance for members through catastrophe swaps with the reinsurance market. In 2014 it accessed catastrophe bond markets for the first time with a three-year, USD 30 million bond covering hurricanes and earthquakes, providing CCRIF multi-year access to reinsurance at a fixed price.

The risk pool mitigates cash flow problems faced by its members after major natural disasters by providing rapid, transparent payouts to assist with initial disaster responses. It has made 22 payouts to 10 members for a total of $69 million, all within 14 days. CCRIF was the first to pay claims associated with the 2010 Haiti earthquake and has paid out more than $29 million in response to 2016’s Hurricane Matthew.

Microinsurance Helping Close Insurance Gap

Not to be outdone, the private sector has demonstrated its commitment to bringing insurance solutions to emerging economies through the industry consortium and venture incubator Blue Marble Microinsurance. Blue Marble’s founding consortium has committed to launching 10 microinsurance ventures in the next 10 years to deliver risk management solutions to the underserved. Through collaboration with strategic partners, including government and quasi-government entities and innovative technology-enabled platforms, Blue Marble seeks to improve sustainability by expanding the role of insurance in society. These ventures will consider unique distribution methods, local partnerships, product development and impact services.

Blue Marble is currently working to close the protection gap in the risk that climate change poses to smallholder farmers in Latin America with the intention to launch pilots in 2017. Blue Marble understands the value of public sector–private sector partnerships in achieving its mission; it is coordinating its initiatives to bolster agricultural production and the management of associated risks with local government officials, including Ministers of Agriculture.

Given the recent slowdown in global demand for commodities and the persistent social inequalities and corruption in some nations, it is more important than ever for governments in the Latin America/Caribbean region not only to protect the economic and social gains made in the last decade, but provide the systems and institutions to promote further sustainable growth. Partnering with the private sector ensures the best practices, innovations and risk reduction and management techniques of the insurance industry are combined with the risk knowledge of regional governments, thereby ensuring resilient cities and communities are poised for strong future growth.

Insurance Natural Disasters Risk Mitigation

Aidan Pope

CEO for Latin America and the Caribbean at Guy Carpenter

Aidan Pope is the CEO for Latin America and the Caribbean at Guy Carpenter. He has more than 30 years of experience in the LAC treaty reinsurance business. Prior to joining the firm, he established offices in Mexico and Brazil for his previous employer.

Credit: Brink News

St.Lucia Hosts Two Critical Climate Change Conferences

The Ministry of Sustainable Development, Energy, Science and Technology in St Lucia, the OECS Commission and the High Level Support Mechanism are hosting two important meetings on Climate Change this week at the Bay Gardens Hotel in Rodney Bay. The first meeting, which concluded yesterday, brought together senior climate change negotiators from across the Caribbean over two days to discuss the major issues ahead of global negotiations that will should lead to the signing of a new international climate change agreement. The new agreement is expected to be signed at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris at the end of the year.

St Lucia is also host to a second meeting from January 28 to 29. The meeting will bring together Caribbean ministers with responsibility for climate change to address four main objectives:

  1. provide ministers with a status report on the climate change negotiations;
  2.  provide political guidance to CARICOM negotiators participating in the negotiations;
  3. prepare ministers for engaging in climate change negotiations during 2015; and
  4. identify and discuss priority political actions that are required at the national level to accelerate the national and regional responses to climate change.

These two meetings are critical in helping to formulate a coordinated regional approach to the myriad issues on climate change—particularly in the areas of adaptation, mitigation, loss and damage, and climate financing.

Credit: Caribbean Hot FM

COP2O Week 1 Recap: Caribbean notes “small victories” and anticipates Ministerial decisions

Week two of COP20 is now underway in Lima, Peru. Here's a round-up of week one from  Sharon Lindo, International and Regional Policy Officer at the Caribbean Community Climate Change Centre.

The Caribbean Community continues to carve out a niche for itself in the Climate Change negotiations underway at COP 20 in Lima, Peru.  If the first week of COP20 were to be summed up in a few words, it would be one of celebrating small victories.  But any seasoned negotiator would caution against celebrating now.

The Alliance of Small Island States welcomed the call by the Subsidiary Body for Scientific and Technological Advice for the Intergovernmental Panel on Climate Change outcomes to inform the Ad-Hoc Working Group on the Durban Platform and other UNFCCC processes.  This augers well for CARICOM, who have always supported science-based methods to inform action in the negotiations.  The region looks forward to the use of the IPCC reports and other similar scientific processes to inform the 2015 Agreement.  Undoubtedly the Region is encouraged by this first step.

In addition, the Caribbean Community considers the decision on bunker fuels timely. Under this arrangement the IMO and CMO will be allowed to continue their work and report to the COP without having any immediate financial obligations.

There has been much discussion and variance in positions on the Co-chairs Decision Text.  While the current text does not offer all things to all Parties CARICOM believes that it contains enough substance for Parties to engage meaningfully.  This is especially important if guidance is to be given to commence work on the INDCs.

The Region is also looking forward to receiving the Revised Elements Text and the finalization of the Executive Committee for Loss and Damage.  CARICOM continues to advocate for a seat on the Committee for SIDS as the issue is of paramount importance to this group.

Small victories are being celebrated in Lima, but the region is treading carefully and looks with cautious optimism at the week ahead.  There are a few crucial items to be decided by the Ministers, including how to address the INDCs and whether these should only be based on mitigation, which is currently only supported by CARICOM.  The end of the next week will reveal whether CARICOM Ministers are able to hold its position and convince other delegations of its merit.

In typical COP tradition the next week will be a marathon for delegations.  By all accounts there still remains substantial work if countries are to meet the 2015 deadline.  The unified voice of small island states in the Caribbean Community and the wider alliance is essential in the days ahead if the Paris meeting will meet expectations.  Like the rest of the world, we are eagerly anticipating the final decisions of Ministers on Friday.

Save the date

Also read:

COP 20 to Lay Foundation for Paris 2015 Agreement

Finance for Climate Action Flowing Globally – Upwards of 650B in 2011-2012

Post-COP 19 Round-up: Six outcomes welcomed by the Caribbean

(Left to Right) Selwin Hart, Dr. Kenrick Leslie, Dr. Ulric Trotz

(Left to Right) Selwin Hart, Dr. Kenrick Leslie, Dr. Ulric Trotz

Caribbean Climate released a widely reviewed post called COP 19 – Five things the Caribbean anticipates in the lead up to the 19th session of the Conference of the Parties (COP 19) to the UNFCCC and the ninth session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol. Several decisions were taken at the event in Warsaw, Poland that are of particular relevance and importance to the Caribbean.

  • The region successfully lobbied for the establishment of a Loss and Damage Mechanism.
    The Warsaw International Mechanism for Loss and Damage consists of an Executive Committee, which will develop the modalities to assist developing countries that suffer loss and damage from extreme events and slow onset events precipitated by climate change. While it does not explicitly mention a compensation mechanism as demanded by vulnerable countries, it does not prohibit the Executive Committee from discussing it. The Mechanism has been established under the Cancun Adaptation Framework even though the position of the Caribbean is that loss and damage goes beyond what can be accomplished through adaptation.
  • Agreement reached to reduce emissions from the forest sector in developing countries. Norway, the United Kingdom and the United States of America pledged US$280 million to support these actions. This will be of particular relevance to CARICOM countries such as Belize, Guyana and Suriname.
  • The Adaptation Fund Board (AFB) reached its target of mobilizing US$100 million to fund the six projects in its pipeline. These include a project in Belize, which had been submitted by PACT, one of only two National Implementing Entities (NIE) in the Caribbean accredited to the Adaptation Fund. The other NIE is in Jamaica, which has also received funding for its project.
  • The Climate Technology Centre and Network (CTCN) is now fully operational. This follows the COP's adoption of CTCN's modalities and procedures. Starting December 8, 2013, Caribbean countries can submit their technology requests to the CTCN, which is hosted by UNEP's Danish office.
  • The Green Climate Fund (GCF) has been operationalized. Developed countries have been asked to channel a significant portion of their US$100 billion per annum pledge for climate change though the GCF.  The Board of the GCF has been tasked with ensuring that there is an equitable balance of funding for both adaptation and mitigation. All developing countries are eligible for funding from the GCF.
  • Parties to the Convention agreed to continue to work towards establishing a new legally binding climate change agreement by 2015.  This would be achieved through the convening of a high-level Ministerial dialogue in June next year to increase the mitigation pledges by developed countries and the summit to be convened by the Secretary General of the UN in September 2014. A draft negotiating text should be available at COP 20 next year to enable Parties to finalize the agreement in Paris at COP 21 in December 2015.

We welcome these developments and will continue to advance the region’s interest.

Also read: COP 19 – Five things the Caribbean anticipates

COP 19 – Five things the Caribbean anticipates

The 19th session of the Conference of the Parties (COP 19) to the UNFCCC and the ninth session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol will take place next week (November 11-22). The conference will be held at the National Stadium in Warsaw, Poland.

 Five possible outcomes that will benefit the Caribbean:
  • COP 19 is billed by many as the "Finance COP". A Ministerial high level segment will address issues on long term financing for developing countries. A pathway detailing how donor countries will honour the US$100 billion a year by 2020 pledge made at the 2009 U.N summit in Copenhagen, accompanied by interim targets and a private sector engagement plan would benefit the region.

Currently, there’s no specific date for donor pledges to begin, but developing countries have already contributed a majority of emissions reductions even without promised support from developed countries.

  • Operationalization of REDD+ activities. The region's heavily forested countries, particularly Belize and Guyana, are facing increased deforestation and would benefit from comprehensive programmes aimed at addressing this problem.
  • Raise mitigation ambition. The development of a road map to use the Ministerial summit scheduled for next year to increase the level of mitigation ambition, specifically cutting emissions substantially to limit global warming to 2°C.
  • Establish Loss and Damage Mechanism. A decision to establish such a mechanism would allow for the provision of compensation to countries that have suffered and will continue to suffer irreparable damage and loss due to climate change.
  • Draft the new CCA.  A significant shift from general discussions to the drafting stage for the new climate change agreement (CCA), the successor to Kyoto, would advance the likelihood that the negotiating text can be produced by the end of 2014 and ultimately allow for copious perusal and discussion.

Under Decision 1/COP.17, the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) was given the  ambitious mandate: first, to deliver by 2015 a new international climate change agreement that brings all Parties together in taking action on climate change, and second, to undertake essential work on enhancing pre-2020 mitigation ambition. Success depends on all Parties and the Co-Chairs of the ADP working together to make the best use of the time available, guided by a clear plan of work.

**Bookmark this page for regular updates from the 5Cs’s delegation at COP 17.

UNITAR Opens ‘Climate Change Adaptation, Loss and Damage’ Online Course



The United Nations Institute for Training and Research (UNITAR) is now accepting applicants for the new online course on “Climate Change Adaptation, Loss and Damage”.

The five week long Climate Change Adaptation, Loss and Damage course will run from June 3 to Juny 7, 2013. This course aims to facilitate international negotiations, public sector work, and diplomatic engagement in relation to climate change impacts. In addition, adaptation measures through an enhanced understanding of its science, the international policy framework, and the key negotiation issues pertinent to the UNFCCC process will be covered.

By the end of the course, participants should be able to:

  • Comprehend climate change science and the observed and projected impacts of climate change;
  • Track and explain the international adaptation and loss and damage policy framework, in particular the negotiations under the UNFCCC;
  • Define and understand adaptation, loss and damage from climate change impacts and its links to mitigation;
  • Appreciate international considerations for climate change decision-making;
  • Appraise the key issues in the ongoing international climate change negotiations, and how to build and move forward from the outcomes of COP18.

The course is designed for mid to senior-level government officers in ministries preparing for and/or taking part in conferences as well as staff of intergovernmental/nongovernmental organizations. It also targets entry-level and mid-career diplomats working in a multilateral setting. Private sector specialists and students whose work or studies are related to this subject are also encouraged to apply.

Please find more information on registration, fees, and course content here.

%d bloggers like this: