Resilience in the face of natural disasters

Picture1

In the past few weeks the world’s attention turned to natural disasters and the losses they cause. Hurricane Harvey in South Texas; floods in India, Bangladesh and Nepal; Hurricanes José and Katia in the Gulf of Mexico and the destructive power of Irma in the Caribbean and Florida sent a clear statement that the effects of climate change haven’t gone unnoticed.

Although there is still a gap in research to clearly connect climate change to these events, some correlation can be drawn between the rise in global temperature and the violence and intensity of storms and floods. Warmer oceans and warmer air generate extra moist and energy to feed hurricanes – and the elevated sea level is prone to cause inundations.

If addressing the root causes of climate change may require an international collaboration between States in order to secure and enforce cooperation agreements, dealing with the impacts of climate change may be achieved by means of community effort. As put by Dr Katrina Brown, from the University of Exeter:

“People are at risk because of the impacts of climate change. But, actually, how that impacts on people is also dependent on the ways that communities build resilience”.

Resilience is the capacity to react to shocks and crises. More elaborately, it is “the ability of people, households, communities, countries, and systems to mitigate, adapt to and recover from shocks and stresses in a manner that reduces chronic vulnerability and facilitates inclusive growth” (USAID, on page 5).

Humanitarian response is the immediate short-term attempt of resilience that follows a natural disaster. In this case, time is of the essence. A timely prompt response is essential to provide the necessary support to help the victims to bounce back.

On a previous post I mentioned how technology can advance development issues (the ‘tech for good‘ movement) and disaster relief is a clear example. Right after the events, GlobalGiving set up electronic relief funds for Hurricanes Irma and Harvey, for the South Asian flooding and for the Mexican Earthquake and Hurricane. With the power of a mouse click the entire world is now able to support the affected communities. Donations are channeled to vetted local organisations that will help build resilience from the ground-up and even after the disaster is no longer portrayed in the cover page of the news.

GG
Source: GlobalGiving website

Another form of resilience building is to focus on the long term horizon. There are many strategies that can be followed, but I would like to emphasize one particular experience also related to climate change: the development of innovative climate insurance tools.

This includes parametric insurance products that uses objective indexes (such as the amount of precipitation, for example) to assess losses and to pay indemnity associated with natural disasters. Under these products cover is triggered either by excessive rain (leading to floods, such as in the recent episodes in India and Houston) or excessive drought. The presence of a clear-cut parameter to authorise payments eliminates long and costly adjustment proceedings, two characteristics to run against prompt resilience.

Parametric coverage is reported as being currently used by Spanish olive growers, members of the Agricultural Association of Young Farmers. Through a web-based underwriting and pricing platform, their harvest is protected against weather fluctuation.

The Global Index Insurance Facility is another example of a parametric product. It is operated by the IFC and the World Bank and has insured a total of 1.3 million farmers. As described by the IFC: Index insurance is an innovative approach to insurance provision that pays out benefits on the basis of a pre-determined index or loss of assets and investments resulting from weather and catastrophic events, without requiring the traditional services of insurance claims assessors. It also allows for the claims settlement process to be quicker and more objective“.

Climate insurance tools have recently appeared on public policy debate. Last month, the Indian Ministry of Finance and Department of Economic Affairs released an Economic Survey which suggested the adoption of Catastrophe Risk Pools (CRP) to handle climate losses in the country. The idea is to create new forms of financial resilience to complement the immediate humanitarian relief after the disaster: “Innovative products supported by risk models and reinsurance pools can provide huge opportunities to the insurance industry in India. One such model is that of Catastrophe Risk Pools (CRP) that aim to put the focus on proactive financial planning to deal with adverse impacts of natural disasters, instead of relying on fund-raising efforts after disasters, resulting in reduced economic losses as well as lowering the impact of disasters on the national budget. Financial instruments used in creating these could include contingency funds, contingent loans, grants, besides other risk transfer solutions” (on page 133).

The recent events expose the fragility of human beings against the violent forces of nature – something that Freud mentions as one of the causes of constant suffering of humanity. It also evidences the need of building resilience mechanisms to face those disasters. While the root causes of climate change are not tackled by countries, community efforts, as varied as GlobalGiving’s platform and the new insurance products, remain paramount. If the chart below with natural loss events until 2015 is worrying enough, imagine when Harvey, José, Irma and others are included.

Natural Loss Events Worldwide 2015 – Geographical Overview – Harvey, José and Irma yet to be included

Picture2
Source:
https://www.ifc.org/wps/wcm/connect/d6407581-5ad1-4144-abe2-df06e5f3168c/Note-9-EMCompass-Innovative-Insurance-to-Manage-Climate-Risks.pdf?MOD=AJPERES

*** If you want to donate to the victims of the hurricanes and floods, here is the link to GlobalGiving relief funds:

After the donation, you will receive continuous follow up informing how your money was used.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s