Crop Insurance as a Risk Management Strategy in Bangladesh

International Financing: Financial support from the international community would be
required to either subsidize CI schemes and/or to provide risk capital to finance their costs
for reinsurance and consequently the costs of premiums. The existing ex-post, ad-hoc
model of financing natural disaster losses in developing countries by the development
partners fails to provide disaster-prone countries with sufficient incentives for mitigation
and risk reduction. As donor-funding arrives in the aftermath of catastrophic events, such
cyclone Sidr, and by and large is used for emergency relief and reconstruction purposes,
very little of this aid is invested in long-term mitigation projects. As opposed to
commercial property insurers, which frequently link the very availability of insurance
coverage to the implementation of concrete risk reduction measures by the insured, donors
require nothing of this sort. As a result, countries at risk see little economic or political
benefit from investing in mitigation or better enforcement of construction codes or land-use
policies that would restrict construction activities in harm’s way. Besides, there is
uncertainty in the quantum of aid, which depends often on the media exposure of the
events. For example, international support for the Indian Ocean Tsunami was exceptional,
with estimates of about US$7,000 per affected victim, which can be compared, for
example, with the devastating floods affecting Bangladesh in 1998, where support was
estimated at about $3 per affected victim (Tsunami Evaluation Coalition, 2006). Besides,
less dramatic, slow-onset climate disasters cumulatively affect the developing countries in
bigger ways, which remain unnoticed and neglected. So this culture of funding ex-post
needs to be changed a little, and more money should be made available for ex-ante
financing. Therefore, international financing can create either an International Insurance
Pool (IIP), as suggested by the AOSIS, or a Climate Impact Response Fund (CIRF), as
suggested by Muller, or the Climate Change Funding Mechanism (CCFM), as proposed by
the Germanwatch. The funds in such instruments can be mobilized through the following
means:
o The first source can be the financial contributions by Annex-B (industrial country)
Parties to the UNFCCC. These contributions could be based on the criteria of
capability (e.g. GDP/person) and/or the aggregated amount of emitted CO2 (per
person) since a specified point in time (say since 1990). However, from the political
point of view, the latter criteria will be a sensitive issue. But the persuasion for this
has to be based on the application of the accepted principle of common, but
differentiated responsibilities.
o Some additional revenue-generating approaches can be explored by the developed
countries that, in turn, can set incentives for their own citizens to limit GHG
emissions. These may include imposing climate fees on aviation (as proposed by
Muller), or a general CO2 fee. To finance such an international fund, countries may
also consider using at least a part of the income generated by auctioning emission
rights within national emissions trading schemes. If the income generated by
auctioning were used to set up regional or national adaptation funds, a window of
these funds could be used for contributing to the proposed international pool. One
main benefit from these contributions would be a reduced vulnerability of the poor in
the developing countries to climate disasters, and hence the ability to avoid diverting a
growing percentage of development aid for emergency and disaster relief. For
example, in 1987/88, the share of disaster assistance from ODA was 1.61%, while it
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