$10 million annually each. Countries vulnerable to climate change may get disaster insurance
Rich countries could provide the world's 100 of the world's most vulnerable countries with a total of $25 billion a year to protect them from climate disasters, meaning each country would receive as little as $10 million, according to research published today.
The findings come a week before the UN climate summit (COP28) in Dubai, where countries are set to launch a world-first fund to help countries cope with the costs of climate damage.
With rich countries under pressure to fill the void, researchers from the University of Cambridge's Institute for Sustainability Leadership said they had made a "breakthrough" in understanding how the money could be used to protect countries from the escalating cost of storms, droughts and rising sea levels.
First, the researchers' findings confirm that the world's most vulnerable countries remain uninsured until 2050 with insurers and others in capital markets, based on modeling the risks posed by climate change.
Dr Ana Gonzalez Pélez, lead author of the study, which was seen exclusively by Reuters before its publication, said: "This is phenomenal, because there is a preconception that these countries cannot be touched."
"In fact, we have the numbers that show it can be insured."
Second, the researchers showed how risk-sharing systems, and primarily the insurance system, could use donor countries' contributions to fund climate protection "premiums," which would significantly increase the protection available to countries vulnerable to climate change.
When used as distinct support, donor funds of $10 million for each of those countries could generate $200 million to $300 million per country in pre-coordinated annual protection, versus a combined $25 billion if distributed to 100 countries, the researchers said.
The scheme will use this relatively modest funding from donors to provide insurance against the most costly, but unpredictable, climate risks, such as hurricanes and floods, which may occur only once every decade or every few decades.
Rowan Douglas, chief executive of climate risk and resilience at UK-based insurance firm Hawden, which co-authored the research, said: "The idea is to use this new source of funding to protect these countries on a structural level.
"Currently, there is no product that protects national economies in that sense," Douglas said.
The need to act is urgent. Small island developing states face potential losses of between 50 percent and 300 percent of their gross domestic product due to extreme weather events, the study said.