ProAdapt The Role of Insurance in Adaptation to Climate Change Nikhil da Victoria Lobo Head of Americas Swiss Re Global Partnerships General Public Release

The growing burden of uninsured losses Natural catastrophe losses 1970 – 2015 (in 2015 USD billion) 2 Source: Swiss Re Economic Research & Consulting and Cat Perils.

Financing is a pillar of integrated disaster risk management 3 Adaptation Identification Assessment Prevention & mitigation What risks do we face ? Systematic Cross- sectoral Can we quantify it? Frequency Severity How can we minimize it? Improve quality Build new protection How can we manage the residual risk ? Change behavior Pre-finance Risk transfer 4

How to close the protection gap 4 gap 4 Which risk? Governments Who carries the risk? Pooling Insurance schemes and pools to increase insurance penetration Macro Risk transfer solutions for (sub)sovereigns to cover their direct or indirect costs Micro Simplified products distributed via aggregators such as MFIs, NGOs, and corporates Risk transfer solution Businesses, homeowners, farmers Public physical assets Emergency response costs Foregone revenue Uninsured private assets Livelihood assistance Protection gap Individuals

5 Macroinsurance: Using risk transfer tools to enhance the financial condition of the public sector Reinsurers Government PremiumsInsurance Policy Capital MarketsInsurers Policy: Insurance linked securities ("cat bonds"), swaps and reinsurance Risks: Natural catastrophes, agriculture risk, pandemics, longevity Use of funds: Emergency costs, long term liabilities, internal funding Risk transfer creates incentives around prevention, puts a price tag on risk and creates alternate sources of adaptation capital 5

6 Examples of innovative PPP risk transfer solutions Vietnam: Agriculture yield cover Pacific Islands: Earthquake & tropical cyclone risk Kenya: Drought insurance for seed growers Uruguay : Hydropower shortfall due to drought India: Weather insurance for farmers Caribbean: Earthquake & Hurricane risk for governments 6 Haiti/Central America: Micro catastrophe insurance Mexico: Earthquake/hurricane and livestock risk Ethiopia/Senegal: R4: Crop insurance for small scale farmers Bangladesh: Community flood insurance Serbia/Macedonia/Albania: Homeowner's earthquake & flood insurance (Europa Re)

7 Case study Uruguay: Largest Energy Risk Transfer to Protect Against Drought Risk Solution features  Insured peril: Drought  Use of proceeds: Purchase of energy from alternative sources when drought conditions cause lack of hydro power  Transaction Size: USD 450 m  Client: UTE (Uruguayan state-owned power company)  Arranger: World Bank Treasury  Swiss Re as lead risk taker

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