Imperiled people worldwide might be saved financially from rising climate risk by "a little paragraph" in the global framework on climate change being drafted this December in Copenhagen.
The blurb could give insurance a formal role in international efforts to confront increasing threats related to drought, flooding and growing storms. That could spark a sweeping change, participants say, if one of the world's largest industries is mobilized to help protect populations. One suggestion promotes the creation of a global insurance pool meant to protect billions of people.
The outline could mean that victims in developing countries receive food and financial redress more quickly and efficiently after catastrophes. But there is perhaps a greater outcome: Many damages might never occur. Any global approach using insurance would likely contain strong prevention requirements written into policies. They would make nations in the path of hazards strengthen their defenses against natural calamities.
Nothing is certain yet. But an important "watermark" emerged from the climate negotiations held in Bonn, Germany, earlier this month, said Koko Warner, an insurance expert at the U.N. University in Bonn.
Negotiators recommended in a formal focus paper that insurance should be a component of the international climate treaty that succeeds the Kyoto Protocol in 2012. It would be a tool to encourage adaptation in drying deserts, along sloshing shorelines and in deluged deltas.
"The timing is good right now," Warner said. "There's a lot of opportunities right now to move insurance forward."
A global insurance pool to cope with growing risks
The move comes as the number of natural catastrophes is rising. Tsunamis, severe storms, floods and drought have increased since 1980, when fewer than 400 events were recorded worldwide, according to Munich Re. At least 600 calamities have occurred every year except one since 1992. More than 1,000 events struck in 2007.
Deaths are also climbing. Last year, about 238,000 people died in natural and man-made disasters, the fourth-highest number since 1970, according to Swiss Re. Experts believe that trend will grow, in part because carbon dioxide emissions already in the atmosphere will drive a rise in disasters for several decades.
"We will have a continuous increase in the number of these events -- and the losses," said Peter Hoeppe, the top scientist at the Munich Re Corporate Climate Center.
To address those disasters, the Munich Climate Insurance Initiative, a coalition of researchers, insurers and scientists founded by Munich Re, has introduced a sweeping plan to create a global insurance pool composed of developing countries. The group gave a presentation to negotiators in Bonn this month.
The program would provide coverage for extreme events, like cyclones and droughts that occur once every few hundred years. Developed countries responsible for releasing most of the climate-altering greenhouse gases, like the United States, would pay the claims through an international adaptation fund. The program would also buy reinsurance in case its surpluses are drained.
For less severe events, another tier of the program would be established to install weather monitoring technology that could be used, for example, to track storms and measure wind speeds. Publicly funding that infrastructure is seen as an enticement for private insurers, helping them to quantify risks as they expand into developing nations.
Insurance agents in remote outposts
Triggering insurance policies when wind gusts or other natural acts of violence reach a certain point can save companies the expense of sending adjusters to remote reaches of the globe to ascertain damages sustained by one farmer or one village. Public money could also be used to educate people about insurance and train others to sell policies at places like local credit unions, microfinance outlets, or even schools.
Those steps could make it profitable for private insurers to offer policies in areas currently believed to be too difficult to service, said Andrew Dlugolecki, an insurance expert who won the shared Nobel Peace Prize in 2007 for his work on climate change.
"That is a major breakthrough," he said.
The program could mean that poor nations in Africa, Asia, South America and elsewhere would receive financial help much faster after a disaster, supporters say. Currently, aid groups seek donations following a calamity, but that can be difficult, especially if multiple disasters strike simultaneously.
"Everybody's going around raising money for things," said Craig Churchill, director of the Microinsurance Innovation Facility in Geneva. "If you do the insurance mechanism, you can say, 'OK, you insured this event. The event occurred. Pay up.' And the insurance company pays up."
He sees one wrinkle, however. National governments receiving the payments after a mega-event might be tempted to use some of the money for, say, new Jeeps. "The drawback ... is how do you make sure the benefits are going to get to the people who are really affected by the disaster?"
Bush negotiators said no
Still, the model could amount to a transformation in how catastrophes are paid for as more international aid is being used for disaster relief and less for education, combating poverty, and health improvements.
In 1987-89, for example, emergency assistance accounted for 1.6 percent of all international donations, according to Sönke Kreft, who runs the climate and insurance program with Germanwatch, which helps developing countries in the Southern Hemisphere. That number jumped to 8.5 percent in 2003.
"Extreme weather events are on the rise," he added. "This is not a sustainable trend."
The plan by the Munich Climate Insurance Initiative is built upon a critical cornerstone. If nations want to receive the two layers of insurance, they must first prevent as much damage as possible. This could come in the form of planting mangroves along vulnerable coastlines, for instance.
That can save lives. But there's another potent reason behind the requirement, and it's political: Developing nations would be loath to support a plan that bleeds subsidies to other nations without the promise of reduced risk.
"Industrialized countries want to make sure they get a lot of bang for their buck," said the U.N. University's Warner, a contributor to the plan. "Prevention is really important."
It's unclear if the United States will support the concept of a global insurance pool next December. Negotiators in former President George W. Bush's administration were alone in explicitly opposing that idea last October. They did, however, express support for private market solutions as proposed in the plan to cover less severe events.
Negotiators under President Obama could not be reached for comment.
Insurance gains momentum, but is it enough?
The plan altogether -- including both tiers of insurance and the prevention program -- would cost between $8.2 billion and $10.1 billion a year, according to estimates by the Munich group. It notes that those costs could rise significantly if life coverage is incorporated into the plan.
The next test comes in December, when negotiators from around the world meet in Copenhagen to hammer out the framework for the next climate treaty. Warner expects the convention to include "a little paragraph" in its blueprint that says an insurance mechanism should be explored and funded. It might even point to an entity that would operate it.
It's unclear if the Munich group's plan will be included -- even partly -- in the final treaty for 2012. But for now, supporters are happy that, finally, there is some progress.
"In a perfect world, we would have crossed that threshold about 15 years ago," Warner said.