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Original Research

Insurance mechanisms for tropical cyclones and droughts in Pacific Small Island Developing States

Florent Baarsch, Ilan Kelman

Jàmbá: Journal of Disaster Risk Studies; Vol 8, No 1 (2016), 12 pages. doi: 10.4102/jamba.v8i1.288

Submitted: 28 December 2015
Published:  31 August 2016

Abstract

One group of locations significantly affected by climate-related losses and damage is the Small Island Developing States (SIDS). One mechanism aiming to reduce such adverse impacts is insurance, with a wide variety of products and models available. Insurance for climate-related hazards affecting Pacific SIDS has not been investigated in detail. This article contributes to filling this gap by exploring how insurance mechanisms might be implemented in the Pacific SIDS for tropical cyclones and droughts. The study examines opportunities and constraints or limitations of some existing insurance mechanisms and programmes as applied to the Pacific SIDS. Eight insurance mechanisms are compared and discussed regarding the premium cost compared to the gross domestic product per capita, the amount of payout compared to the damage cost, the reserve and reinsurance, and the disaster risk reduction incentives. As such, this article offers a decision-making tool on insurance development for the Pacific SIDS. Ultimately, implementing disaster insurance for the Pacific SIDS depends on political will and external technical and financial assistance.

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Author affiliations

Florent Baarsch, Climate Analytics gGmbH, Berlin; Potsdam Institute for Climate Impact Research, Potsdam; CESifo, Munich, Germany
Ilan Kelman, Institute for Risk and Disaster Reduction and Institute for Global Health, University College London, United Kingdom; University of Agder, Kristiansand, Norway

Keywords

disaster; disaster risk reduction (DRR); drought; insurance; tropical cyclone

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ISSN: 1996-1421 (print) | ISSN: 2072-845X (online)

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