D. Integrating Preventive Measures into Policies
Definition
Prevention actions against extreme weather events are information, activities and measures to avoid existing and new extreme weather events (United Nations General Assembly, 2016), strengthening the resilience of potentially affected producers, the private sector (SMEs) and the government. It is a central part of DRM.
STEPS
Implementing preventive measures broadly contains the following steps
Brief Description
Appropriate preventive mechanisms should be implemented based on the risk assessment and the DRM analysis conducted. According to the Sendai Framework for Disaster Risk Reduction 2015-2030, risk reduction practices should be multi-hazard and multi-sectoral, inclusive and accessible in order to be efficient and effective. They have to be linked at different levels: for example, low-income rural households may have no alternative but to farm on degraded or drought-prone land. Under these circumstances, a stand-alone preventive measure at the micro level may be sufficient; however, integration to the overall government policy framework is important, especially with regards to insurance solutions.
Involved Actors
Recognizing the importance of policy-making and the role of coordination, national and local governments should engage with relevant stakeholders, including women, the community of practitioners, and academics, from the beginning of the design of policies and standards. This ensures locally driven design and ownership at a high level of agricultural innovation.
As prevention in the agricultural value chain is highly complex, the leading ministry (for the agricultural sector, the MoA) requires coordination with many line ministries (e.g. rural development, transport, industry, housing, finance). If the DRM analysis identifies the demand for insurance, the insurance industry should be included in the dialogue for enhancing prevention.
SYNERGIES: INSURANCE AND RISK ASSESSMENT
Positive effect on basis risk
Reduction of losses is not only essential for indemnity products but is also important for index insurance (see Phase 2 Retention and Transfer). Due to the basis risk[9], the insured can suffer a loss without triggering a payout. In these circumstances, prevention and adaptation measures are key to sustaining the livelihood of those impacted by weather-related disasters.
Linking preventive public works
programmes to insurance
Linking preventive public works programmes for the construction of resilient infrastructure with insurance would not only strengthen resilience and benefit the poor (via cash transfer) but also enable them to pay insurance premiums (e.g. R4 insurance in Africa).
Lower insurance premiums
Prevention could lead to lower insurance premiums because pricing indemnity products include factors such as the projections of potential losses for compensation. Indemnity insurance products would be more affordable, potentially serving as an incentive to invest in prevention measures. Insurance practice at the micro level is varied but national-level products with large-scale prevention measures implemented by the government could be more successful.
Higher acceptance of insurance products
The acceptance of index products can be enhanced by combining insurance with preventive services such as drought-resistant seeds, agricultural training and advisory services through agricultural extension services, and access to storage facilities, etc. (more details in
Increased acceptance of high-risk clients by insurance providers
In disaster-prone areas with frequent and severe extreme weather events, insurance companies may reject potential customers due to their high risk. If applicants apply preventive measures, access to insurance may be granted. For example, partnerships between the government, the insurance industry and construction firms could foster ‘build back better’ building codes for resilient houses.
Easier access to finance for DRR activities
Insurance can increase access to capital or guarantee green bonds for building resilient infrastructure (prevention).
[9]
Basis risk can be understood as the risk that insurance claims do not adequately reflect the losses incurred. Consequently, the insured who suffer a loss may not always receive a payout (or get funding without any losses incurred).