Economic impacts and opportunities working group Meeting #2 – June 14th, 2016

Economic impacts and opportunities working group 1) Introduction – RegionsAdapt Secretariat; 2) Remaining presentations of Participants – (in alphabetic order); 3) Brainstorming & Discussion on Priority Topics; 4) Closing remarks – RegionsAdapt Secretariat.

Economic impacts and opportunities working group Priority-topics suggested in the 1st meeting: 1.  Cost and benefit analysis; 2. Private insurance applied to the climate risks of specific economic sectors; 3. Adaptation applied to industrial sectors; 4. Methodologies to define baselines. + The first economic sector to be focused through these transversal topics would be: Tourism.

Economic impacts and opportunities working group INDEX INSURANCE Index-based (also referred to as parametric) insurance can offer a starting point for financial risk management in countries where traditional mechanisms are not feasible. Index insurance uses a third-party measure that is related to consequential losses and extra costs to make payments. This third-party measure can be as direct as a measure of rainfall (too little or too much), a level of water in a river, sea surface temperature, or modeled results that estimate the intensity of an earthquake. Index insurance has many advantages over traditional indemnity products. What makes such products particularly suitable for new markets is that they can be developed more quickly to get the “big risk” out of the way. This provides a foundation for innovations that can follow which include more traditional approaches to insurance. Catastrophic El Nino, for example, is a major obstacle in developing agricultural insurance in Peru. Every past attempt to introduce commercially viable traditional product has been foiled by unsustainable losses in the wake of devastating flooding caused by major El Nino events. Thus, removing this big risk is the first step to jump starting a viable market for more conventional insurance products. GlobalAgRisk  has introduced a special form of index insurance against extreme El Nino in Peru, known as forecast insurance. Source: GlobalAgRisk

Economic impacts and opportunities working group Advantages of Index Insurance over Traditional Insurance: Source: GlobalAgRisk