The methodology was tested in eight localities in both developed and developing countries (China, India, Samoa, Guyana, United States, Mali, United Kingdom, and Tanzania), which together represent a wide range of climate hazards, economic impacts, and development stages. The methodology is applicable in any setting where society must consider risk.
Test case in China
In North and Northeast (NE) China, which will likely produce 25% of China’s food crops by 2030, researchers evaluated the loss associated with drought, which constitutes the largest threat to food security and rural social benefits. The case study revealed that by 2030 climate change could lead to a 50% increase in annual drought loss in NE China to USD 1.7 billion, compared with a 6% rise in the North China losses to a still tremendous amount of USD 0.9 billion. Certain climate adaptation measures relating to irrigation, planning, seed-engineering and engineering can help reduce drought loss in these regions.
The study also identified the value of agricultural insurance to transfer risk in the case of extreme (i.e. infrequent but very severe) droughts. Analysis suggested insurance could cover some USD 105 million in the North and some USD 145 million in the NE assuming only 30% of the loss is claimed, resulting in coverage of around 10% of the total drought loss.
Test case in India
In Maharashtra in India, the test case evaluated the loss associated with drought, which amounts to 30% of the state’s food and grain production – even without climate change. This loss would severely impact the 15 million small and marginal farmers. By 2030, a significant drought could lead to a countrywide agricultural loss of more than USD 7 billion, and impact the income of ten % of the population. With droughts historically occurring every 25 years, extreme climate change could change that to once every eight years.
The case study determined a number of measures that could protect crop production and farmers’ incomes in Maharashtra including expanded drip and sprinkler irrigation, drainage construction, improved soil techniques, and crop engineering. In fact, Maharashtra can eliminate much of its expected drought loss by 2030 through low-cost measures with benefits that often exceed their cost.
Notes to editors
About the Economics of Climate Adaptation (ECA) Working Group
The ECA Working Group was formed in September 2008 under the initiating sponsorship of the Global Environment Facility in coordination with UNEP to develop a framework to assist in the design of climate-resilient economic development strategies. Swiss Re, a leading global reinsurer, was a lead contributor to the research. McKinsey & Company, a global management consulting firm, drove the analytical execution and contributed to the fact base of the report. Sponsorship and key guidance was provided by ClimateWorks, an international network of foundations focused on achieving low-carbon development; the European Commission; the Rockefeller Foundation, which brought its deep experience of building climate resilience in developing countries; and Standard Chartered Bank, a global bank with a strong emerging market footprint.
About Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+”by Standard & Poor’s, “A1”by Moody’s and “A”by A.M. Best.
Swiss Re has been associated with Asia since 1913 and now has about 1,000 staff in Asia-Pacific. The company's Asian headquarter is in Hong Kong.
Summary report "Shaping Climate-Resilient Development", pdf, 5.96 MB