ABSTRACT
Many insured assets can be damaged by weather and weather-related events. Tropical cyclones and droughts are two weather phenomena that persistently cause damage. In developing countries, index-based insurance is increasingly being used to enable rapid payouts to support disaster recovery. These products can be taken up at the national level, in Africa through African Risk Capacity. Private insurance companies are also increasingly offering index-based insurance. At present, those taking out these climate-related index insurances pay the full cost. Yet there is now unequivocal evidence that anthropogenic climate change is underway, and along with it, changes in the risk of extreme weather events. Here we argue that, for developing countries, climate justice calls for the added cost of insurance, arising from increased risk of extreme events, to be covered through international finance mechanisms; the residual cost, arising from risks should climate change not have happened, would remain to be covered by developing countries. We then demonstrate, using Malawi as a case study, how climate change attribution science can distinguish between background risk, and the added risk due to human influence on climate, and consequently how the cost of insurance has risen because of climate change. This then allows for insurance premiums to be split between the policy holder and international climate funds.
