Edited by Ariel Dinar and Robert Mendelsohn
Chapter 19: Insurance as an Adaptation to Climate Variability in Agriculture
Alberto Garrido, María Bielza, Dolores Rey, M. Inés Mínguez and M. Ruiz-Ramos INTRODUCTION AND SCOPE Insurance is the largest global industry with total revenue of US$3.2 trillion (Mills, 2005). It is also one of the most vulnerable sectors to the effects of climate change. Penetration rates in developed countries are 100 times larger (US$2700 per capita) than in developing countries ($25 per capita). The growth potential of the industry is therefore great but there are risks involved, especially for insurance policies offering coverage against damage caused by natural catastrophes. The industry is aware of the main challenges that climate change poses for its healthy growth and expansion (ECA, 2009). It is also a leading sector in the fight against climate change and a leading voice in requesting that security levels for construction, infrastructure and human settlements be upgraded and that exposure be reduced. Standard actuarial techniques, insurance contracting and risk transfer and pooling will not be sufficient to avoid significant losses if the insurance industry is to keep expanding and offering protection against natural catastrophes (ECA, 2009). Although it is relatively small, the agricultural insurance sector is also expanding in many countries.1 With almost no exceptions, growth in insured capital and coverage expansion has been coupled with intense public participation in the form of premium subsidies, public reinsurance, tax rebates, direct insurance participation and market regulatory frameworks. Many policy issues associated with the role of public agencies in agricultural insurance have been discussed in the...
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