Mr. David Lesolle (Pic by http://www.iisd.ca)
The insurance sector is going to be one of the hardest hit by climate change, from rising claims to losses on investments.
Speaking at a three day Organisation of Eastern and Southern Africa Insurers’ 37th Annual Conference (OESAI), David Lesolle of University of Botswana said disasters linked to climate change could cost insurance companies large sums of money.
“Insurers in some countries have stopped offering coverage, and others have limited what they cover. It’s also meant higher insurance premiums that many people cannot afford, leaving them uninsured or underinsured,” revealed Lesolle.
“The winners in this sector will be those companies that understand the risks and opportunities facing their businesses, and embed it into their strategies and operations”.
He said there was growing evidence that suggests climate change is worsening through droughts and other severe weather events, such as cyclones, tornadoes, floods and wildfires. These natural disasters can destroy homes, cars, businesses and crops, leading to more and larger insurance claims.
According to Lesolle, there are several barriers to climate change adaptation: financial, institutional, social/cultural, technological and informational. He however said with an increased realisation that available funding may not always be sufficient to cover the financial requirements of rehabilitation, mitigation and adaptation, specifically in case of extreme events, insurance could be worth exploring.
Lesolle advised that if insurance companies were to provide cover, they should refine insurance as the tool for providing risk cover against climate change and variability and ensure that the tool meets the emerging demands and challenges exacerbated by climate change.
He said the African tool must be a premium and achieve: quicker and simpler payouts, different approaches for different countries and differing adaptation responses and aim for a widespread adoption to minimise transaction costs.
He also bemoaned that the most common factor limiting uptake is the low density of weather stations, particularly in Africa and talk of urgent need to determine how contracts can be designed to meet the needs of very vulnerable groups, especially women. “In the longer term, a more intractable challenge is the rising levels of risk as climate change gathers pace.”
