Effectiveness of insurance for disaster risk reduction and climate change adaptation: challenges and opportunities

Agrarian and poor communities in general in the Asia-Pacific region are highly vulnerable to climate change. Effective reduction of vulnerabilities requires aligning sustainable development (SD), climate change adaptation (CCA) and disaster risk reduction (DRR) initiatives. Insurance has been increasingly advocated as a risk management tool both by the CCA and DRR communities. However, to what extent insurance has been able to provide risk management benefits is not clearly evident from available experience. The discussion in this report shows that the uptake and effectiveness of insurance is low in the agricultural sector and amongst the most vulnerable groups. Major barriers exist, and while ways to overcome these can be suggested, the limits of insurance must also be recognized. Insurance does not prevent the occurrence of losses, but it does have the potential to benefit DRR and CCA if the current barriers are adequately addressed. Each country and each region within countries have unique risk and vulnerability contexts and thus the design of insurance services must be context specific and targeted to specific vulnerable communities. Keeping in view the importance of agriculture in the livelihoods of Asian communities, this report mostly delves into the experiences emanating from agriculture insurance, though lessons from other forms of insurance has also been drawn wherever relevant.