Loss & Damage: When Insurance Isn’t Enough

The world’s poorest and most vulnerable nations–who have done the least to cause climate change–are already mobilising resources to cope with the brunt of climate-related harm. When these countries call for finance to address loss and damage, it’s just another reminder that the burden has to be shared much more fairly. It should be paid for by the historical and big polluters – both corporations and states. However, some seem to lack an understanding of what we need L&D finance for.

Climate risk insurance, which allows vulnerable nations and people to transfer risk to bodies with more stable financial bases, is only one aspect of the L&D response. Financial commitments to these risk insurance pools are certainly welcome, but one-time donations are not enough. Developed countries can and must do more to support insurance schemes. They can’t be used as a way of shifting the responsibility and cost from polluters to the vulnerable. Contributions must be sustained, predictable, support the premiums of those who cannot afford them, and increase steadily as climate damage intensifies.

Insurance is not the be-all and end-all of an effective L&D response. By definition, non-economic losses and damages, like loss of life, culture and livelihoods, not to mention land, cannot easily be compensated by payouts. Insurance schemes can’t help those without much property to insure. Remember, it’s just a start.

Vulnerable nations require a source of new and additional L&D funding that can be used for responses to slow-onset disasters, such as the relocation costs that will inevitably accompany sea level rise and desertification. Funds are also needed to provide social protection as well as post-disaster support to the world’s poorest and most vulnerable, regardless of whether their national government has purchased insurance.

It’s also essential that funds for L&D response not simply be diverted from other important and underfunded needs, such as adaptation. In addition to budgetary provisions, many compelling financial mechanisms have been suggested, including levies on international air travel, bunker fuels, carbon emissions and fossil fuel extraction. It is crucial to look closely at L&D finance needs and to proactively set out a course for funding this year. This should start with the SCF [including] [recognising] loss and damage in its definition of climate finance.