IPCC_Managing Risks of Extreme Events.pdf - Climate Access

Chapter 5Managing the Risks from Climate Extremes at the Local Levelthat causes loss, such as insufficient rainfall during critical stages ofplant growth (Turvey, 2001). Weather index insurance is largely at apilot stage, with several projects operating around the globe, includingin Mongolia, Kenya, Malawi, Rwanda, and Tanzania (Hellmuth et al.,2009). Index insurance for agriculture is more developed in India, wherethe Agricultural Insurance Company of India has extended coverageagainst inadequate rainfall to 700,000 farmers (Hellmuth et al., 2009).Index-based contracts as an alternative to traditional crop insurancehave the advantages of greatly limiting transaction costs (from reducedclaims handling) and in improving emergency response (Chantarat et al.,2007). A disadvantage is the potential of a mismatch between yield andpayout, a critical issue given the current lack of density of meteorologicalstations in vulnerable regions – a challenge remote sensing may helpaddress (Skees and Barnett, 2006). Participants’ understanding of howinsurance operates, as well as their trust in the product and thestakeholders involved, may also be a problem for scaling up indexinsurance pilots, although simulation games and other innovativecommunication approaches are yielding promising results (Patt et al.,2009). Affordability can also be a problem. Disasters can affect wholecommunities or regions (co-variant risks), and because of this insurersmust be prepared for meeting large claims all at once, with the cost ofrequisite backup capital potentially raising the premium far above theclient’s expected losses – or budget. While valuable in reducing thelong-term effects on poverty and development, insurance instruments,particularly if left entirely to the market, are not appropriate in allcontexts (Linnerooth-Bayer et al., 2010).The insurance industry itself is vulnerable to climate change. Thecontinuing exit of private insurers in some market areas is seen with theincreasingly catastrophic local losses in the United States (Lecomte andGahagan, 1998), United Kingdom (Priest et al., 2005), and Germany(Thieken et al., 2006; Botzen and van den Bergh, 2008), which in turnreduces disaster management options at the sub-national scale. Climatechange could be particularly problematic for this sector at the localscale (Vellinga et al., 2001), including the probable maximum loss andpressures from regulators responding to changing prices and coverage(Kunreuther et al., 2009).One response to rising levels and volatility of risk has been to increaseinsurance and reinsurance capacity through new alternative risk transferinstruments, such as index-linked securities (including catastrophe bondsand weather derivatives) (Vellinga et al., 2001). These tools could playan increasingly important role in a new era of elevated catastrophe risks(Kunreuther et al., 2009). Another approach is to reduce risks throughsocietal adaptation (Herweijer et al., 2009), and risk communication andfinancial incentives from insurers (Ward et al., 2008). For example,Lloyds of London (2008) demonstrated that in exposed coastal regions,increases in average annual losses and extreme losses due to sea levelrise in 2030 could be offset through investing in property-levelresilience to flooding or sea walls. Similarly, RMS (2009) shows thatwind-related losses in Florida could be significantly reduced throughstrengthening buildings.Risk transfer is broader than shifting the economic burden from oneparty to another. It also entails the transfer of risks from one generation(intergenerational equity) to the next. Risk transfer also has a spatialelement in shifting the risk burdens from one geographic location toanother. Both of these larger transfer mechanisms are significant fordisaster risk management and climate change adaptation at the localscale, but more research is required to assess the localized effects.Spatial and intergenerational equity are considered in Chapter 8.5.6.4. A Transformative Frameworkfor Management StrategiesManagement strategies need to consider adaptation as a process ratherthan measures and actions for a particular event or time period. Experiencein planning and implementing adaptation to climate change as well asdisaster response reveals that socio-institutional processes are importantin bringing together a set of intertwined elements (Tschakert and Dietrich,2010; see Chapter 8). O’Brien et al. (2011) suggest an adaptationcontinuum (see Figure 5-2), where the goal is to move toward partnershipsthat enable social transformations and increased resilience.A key component of the disaster risk management and adaptationprocess is the ability to learn (Pahl-Wostl et al., 2007; Armitage et al.,2008; Lonsdale et al., 2008). This focus on learning partly derives from thefields of social-ecological resilience and sustainability science (Berkes,2009; Kristjanson et al., 2009). As scenarios combine quantitativeindicators of climate, demographic, biophysical, and economic change,as well as qualitative storylines of socio-cultural changes at the locallevel, the participation of local stakeholders is essential to generatevalues and understandings of climate extremes.Adaptation is a process rather than an endpoint and requires a focus onthe institutions and policies that enable or hinder this process(Inderberg and Eikeland, 2009) as well as the acknowledgement thatthere are often competing stakeholder goals (Ziervogel and Ericksen,2010). Fostering better adaptive capacity for disaster and climate riskwill help to accelerate future adaptation (Inderberg and Eikeland, 2009;Moser, 2009; Patt, 2009). However, there are barriers, including lack ofcoordination between actors, the complexity of the policy field(Mukheibir and Ziervogel, 2007; Winsvold et al., 2009), and limitedhuman capacity to implement policies (Ziervogel et al., 2010). Lastly,individual, sector, and institutional perceptions of risk and adaptivecapacity can determine whether adaptation responses are initiated ornot (Grothmann and Patt, 2005).5.7. Information, Data, and Research Gapsat the Local LevelThe causal processes by which disasters produce systemic effects overtime and across space is reasonably well-known (Kreps, 1985; Cutter,1996; Lindell and Prater, 2003; NRC, 2006). Yet, local emergency323