Reducing the impacts of disasters in developing countries is absolutely vital - especially in fragile and conflict-affected contexts. The invention of climate risk insurance has been a major breakthrough in that regard. If they are well-designed and mitigate potential negative side effects, climate risk insurance could play a major role in supporting the poor. To support this, insurance initiatives should monitor both positive and negative impacts.
One of the most recent and promising tools to cope with the consequences of the rising number of disasters is climate risk insurance. In exchange for an annual premium, they quickly provide states and other actors (including individuals) with much-needed cash to cope with the impacts of natural hazards such as hurricanes, droughts and floods. Within certain parameters, policyholders are largely free to determine how they want to use the payouts. The African Risk Capacity (ARC), the Caribbean Risk Insurance Facility (CCRIF) and the Pacific Catastrophe Risk Insurance Facility (PCRAFI Facility) serve as cases in point. To date, they have made 44 payouts to 19 countries totalling to about US$ 173 million. Simply put: they work.
While this is certainly a great achievement, a closer look reveals that there is relatively little empirical evidence that demonstrates that these payouts are also effective in supporting poor people in the face of disasters. In a recent study, Oxfam pointed to the “major evidence gap” regarding the impact of climate risk insurance. How to monitor and evaluate climate risk insurance is therefore an emerging but all the more important debate. It is notable that there is arguably a subtle bias in the practice community in favour of developing criteria to measure the positive intended impact of this type of insurance (see, for instance, the recent discussion paper by Munich Climate Insurance Initiative). Yet, for policy improvement and in making sure that climate risk insurance policies ‘do no harm’ it is of equal relevance to also capture the unintended negative impacts.
Without appropriate safeguards there exists a risk that climate risk insurance payouts may unintentionally re-inforce conflicts and corruption, or change local market dynamics. Climate risk insurance is an instrument that distributes resources. Whenever resources are distributed they affect political dynamics. This is especially true for fragile and conflict-affected contexts, where a good deal of climate risk insurance coverage is to be found.
When insurance payouts are distributed without greater attention to existing divisions and tensions, they might reinforce them and, in doing so, contribute to social conflicts, even violence. Distribution according to a beneficiary list defined by a tribal or political leader or a security force, rather than transparent and neutral selection criteria, might create new dependencies and facilitate corruption. Potential beneficiaries might be asked to pay a small contribution as “repayment” for gaining assistance. Moreover, the influx of outside resources might also change local market dynamics. The sudden provision of goods and services alters market prices, fuels price spirals and reinforces the economic marginalization of disadvantaged groups. These impacts, when grave, could create new vulnerabilities.
Monitoring the unintended negative impacts of climate risk insurance and developing safeguards is therefore crucial to avoid tensions and marginalization early on. It is broader than the ‘classic’ collection of data on outputs and involves, for instance, checking that certain processes are in place to enable conflict sensitivity. For example, accountability frameworks make it possible to trace the distribution of payouts, conflict mitigation strategies allow the public to complain, gender analyses can re-construct how payouts affect men and women. Monitoring and evaluating those is surely challenging, but not impossible. There exists a range of tools (including indicators, regular feedback rounds, social audits) and safeguards that have been used by the peace and conflict community and whose utility depends very much on the context.
In conclusion, climate risk insurance is a new and promising tool that quickly offers cash-strapped countries with much-needed support to cope with the impacts of disasters. Yet, as disaster responses do not occur in a political vacuum, it also key to develop an understanding of how insurance payouts may impact fragility and conflict on the ground. There is a risk that climate risk insurance might unintendedly fuel or even trigger tensions when precautions are not taken. A more balanced dialogue is needed on the potential of insurance and its possible negative consequences. Stakeholders should take these potential negative consequences into account and develop an M&E framework that goes beyond the usual linear approach that measures intended goals and achievements and develop safeguards for more fragile and conflict-affected contexts.
To fight illegal coca plantations and conflict actors’ income sources, Colombia’s president wants to loosen the ban on aerial glyphosate spraying. However, considering the dynamics of organised crime, the use of toxic herbicides will not only fail to achieve its aim, it will have many adverse effects for the environment and human health, fundamentally undermining ways to reach peace in the country. International cooperation and national policy-makers need to account for this peace spoiler.
As India grapples with the worsening impacts of climate change, the need to strengthen its adaptation efforts has become more significant than ever. Climate diplomacy and mainstreaming climate adaptation into the most vulnerable sectors could provide some solutions to overcoming barriers, such as the lack of sustainable funding.
“Climate Security risks will materialise in very different ways and forms, whether we talk about Lake Chad or about the Arctic, Bangladesh and the Small Island Developing States,” said the EU’s Ambassador to the United Nations in New York, Joao Vale de Almeida, in his opening remarks. “But for the EU, there is no doubt, as underlined in 2016 in our Global Strategy, and reaffirmed by the 28 Ministers of Foreign Affairs, that climate change is a major threat to the security of the EU and to global peace and security more generally,” he said.
The challenges facing the international community are growing while the willingness to cooperate seems to be waning. Foreign policy must help bridge this gap. One way to accomplish this is by pushing forward a major achievement of multilateralism: the 2030 Agenda and its 17 Sustainable Development Goals. At a side event during the 2019 High-Level Political Forum, diplomats and policy experts discussed the role of foreign policy in the global sustainability architecture.