Climate change impacts and weather related risks have financial ramifications on the economies of SIDS especially in vulnerable coastal sectors such as tourism, fisheries, and agriculture. The economic losses from these impacts have been estimated in millions of dollars and mostly affect livelihoods in small and medium coastal communities as their incomes are low and their coping strategies limited. Risk perception in these instances is not only about the probability or rate of climatic incidences but also about cultural norms that resonate with loss and damages and the long-term socioeconomic impacts of indebtedness and isolation. Insurance towards coastal flooding and natural disasters are mostly non-existence in these local contexts. If they exist, the programs are often unfathomable by locals, and the benefits are perceived contrarily to intended goals.

Policy highlights:

• Loss and damages resulting from climate hazards and natural disasters necessitate the need for supplementary risk management options for low income and vulnerable coastal communities.
• Demand analysis and stakeholder workshops demonstrate the unique role that micro-insurance plays in securing income and capital assets, and reducing household vulnerability through short-term coping programs and long-term financial security.
• Superior product design, client education and marketing, hybrid governance arrangements, and robust monitoring programs are required for effective piloting and scaling-up of micro-insurance models as adaptation strategies.
• Household savings and informal credits are insufficient in the short-term (coping mechanisms) and unsustainable in the long term, as it perpetuates a vicious cycle of dependence by covering only a small portion of the losses. Even in developed economies, flooding and weather related insurance coverage vary considerably and comprises of bundled state programs, disaster relief, and property insurance.
• Consequently, micro-insurance is gaining recognition as a financial tool to address household and livelihood vulnerability within resource dependent communities and across supply chains. It is defined as the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risks involved. They are important as risk-sharing schemes whereby a pool of people pay premiums into a common insurance program. The aim of this component of the GIVRAPD project is two-fold:
  • i) assess and identify community demand and willingness to buy locally tailored insurance programs as adaptation strategies and risk pooling interventions; and
  • ii) consult and engage key stakeholders on the design, feasibility, protocols, and implementation of micro-insurance as adaptation interventions in SIDS contexts

Picture: MikaelleS