SYNERGIES: INSURANCE AND RESPONSE


Anticipating potential losses

Insurance is a tool to anticipate potential loss and damage and enhances the ability to estimate the impact of weather events on individuals, the private sector and countries.


Enabling governments to plan better


Insurance policies provide information prior to an event about the payout amount and the disbursement time, allowing governments (and other insured) to plan their post-disaster response and relief efforts accordingly.


Reducing liquidity gaps


Insurance (and pre-disaster financing) ensures the availability of funds for post-disaster response and recovery, although insurance should not be the means for paying for response and recovery per se. Index products especially reduce government liquidity gaps after extreme weather events and relax ad hoc budget redistribution that disrupts the development plans of the state.


Immediate start of the response


The appeal-based fundraising process of international humanitarian agencies is time-consuming and may take about eight months from identification of crop failure to humanitarian aid delivery. Index insurance payout is attempted to happen within three weeks, enabling the government to start relief programmes quickly.


Depoliticize disaster responses


As insurance payouts are defined in insurance policies, they follow objective indices, hence helping to depoliticize disaster responses.


Quick re-start of business


The private sector would benefit as quick payouts enable SMEs to restart their business operations, hence limiting post-disaster impacts on the economy (details in Phase 2.A.1 Insurance).


Avoid slipping back into poverty


For the affected population, insurance can play a role as a safety net as it helps the insured to not resort to negative coping strategies that might impede sustainable development, or let affected people slip back into poverty.


Faster replaceĀ¬ment of damaged stock


Insuring the stock for relief programmes would lead to faster replacement if food items or relief equipment were destroyed or damaged.


Appropriate institutional arrangements help quick insurance payouts if the infrastructure is damaged


Institutional arrangements for insurance payouts have to be developed prior to extreme weather events and contain multiple actors from the industry (e.g. insurance providers and reinsurers), the government (e.g. ministries of finance and social protection, and insurance regulators) and delivery channels (e.g. NGOs, MFIs, suppliers and technology providers).

Actors involved have to plan ahead when infrastructure is damaged but quick insurance payout is essential (see section 4.A).