WEF Agenda Blog – China 2017
Insurance – China's path to advancing a clean energy future, food security and city resilience
By Jayne Plunkett, CEO Reinsurance Asia, Swiss Re
What is the impact of global warming on the insurance industry?
Can insurance play a proactive role in protecting the world from financial losses due to destructive climate change?
Can the industry come up with innovative products and solutions?
These were just some of the issues that were tackled at the inaugural Climate Change Summit, for Asia’s insurance industry, in Singapore on 17-18 January 2011.
The Summit attracted more than 150 delegates from around the world. Hosted by Asia Insurance Review and the Geneva Association, the think tank for the global insurance industry, the theme of the Summit was “Tackling climate change – being ready to face threats & opportunities”.
Roman Hohl, Head of Agriculture for Asia Pacific, Swiss Re explained the paradox of agriculture in that 50% more food has to be produced by 2050 to feed a growing population and the change in diet towards more meat and milk products in emerging markets and to cater for the growing biofuel industry, while reducing greenhouse gas emissions – agriculture activities produce some 20% of global greenhouse gas emissions. He also presented some concrete innovative risk transfer solutions to mitigate climate change impacts in Asia in the form of agriculture insurance. Such solutions play a key role in stabilising farm income and stimulating investments that should lead to increased agriculture production, and in so doing, address food security concerns that can be exacerbated by climate change.
He also presented some concrete innovative agricultural solutions for mitigating climate change impacts in Asia. Such risk transfer solutions play a key role in stabilising farm income and stimulating investments that should lead to increased agriculture production, and in so doing, address food security concerns that can be exacerbated by climate change.
In Vietnam in 2010, Swiss Re collaborated with Agribank and its insurer ABIC to structure an index cover to protect against loan defaults by rice farmers following poor harvests, covering up to 500,000 farming households. Vietnam is among the five most severely impacted countries by future climate change and the agriculture sector produces 22% of GDP employing over 50% of Vietnam's 86 million population.
In China in 2009, Swiss Re structured a reinsurance solution for the Beijing Municipal Government with China Re (a domestic reinsurer) to provide additional capacity for stop loss protection, to cap the Beijing Municipal Government's liability to local insurers for losses to crops, and to livestock. The Beijing province is at the southern boundary of China's grain belt of the north-east that is prone to frequent droughts with an expected increase in drought risk with climate change scenarios.
In India, Swiss Re pioneered a deal with Basix (MFI) in Andhra Pradesh for deficit rainfall in 2004 with now 350,000 farmers insured, and has been collaborating with Indian insurers to systematically develop a weather insurance market for agriculture risks in 2005 with now two million farmers insured. Shifts in monsoon rains have a large impact on agriculture production and can lead to a drop of 3% in the country's GDP and leading experts predict more extreme distribution of rainfalls under climate change scenarios.
While insurance offers mitigation to some extent, the typical insurance product has a time length of one to three years while the time horizon of climate change is 50 years and beyond. Such mitigation in conjunction with adaptation measures are very important in the climate change context, and a “broader application of risk mitigation instruments and insurance across the supply chain will spur major increases in investment, productivity and food security in vulnerable regions” said Roman.
Swiss Re’s participation in Asia’s Climate Change Summit came on the back of its involvement at the Climate Summit in Cancun in late 2010, where Swiss Re was active in discussions on how the private sector, including the insurance industry, can strengthen collective responses to climate change, both by supporting a low-carbon economy and making societies more resilient to the effects of changing weather patterns.