Abstract
In regions highly exposed to climatic variability and longer-term climate change, vulnerable communities undertake a number of measures to manage the effects of extreme weather events. Results from a survey of 1059 low income persons in agriculture and tourism in Belize, Grenada, Jamaica and St. Lucia point to a need for a new balance to reduce risk, transfer risk, and effectively prepare for climatic stressors. This corroborates the findings from the IPCC Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaption (SREX). This article seeks to bolster limited evidence to understand the consequences of these measures, and assess whether financial risk management tools could complement current asset-depleting approaches: The results reveal that the dominant responses to managing extreme weather events included: using savings (36 %), borrowing (12 %) and government assistance (9 %). However, one-tenth of the sample is at risk from ‘doing nothing’, which can contribute to loss of productive capacity and income sources, loss of access to finance, depletion of assets, health problems and social isolation. Study respondents indicated a need for alternative financial risk management approaches. The results also indicate a moderate explicit demand for weather-related microinsurance. Overall the results reveal that where vulnerability and exposure to extreme weather events are high, and capacity is low, a rethinking of risk management measures is needed to reduce loss and damage for low-income people.
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Notes
The IPCC (Cardona et al. 2012) offers four sets of actions involved to cope with extreme events including ex-ante measures: “risk identification (involving individual perception, evaluation of risk, and social interpretation) 2) Risk reduction (involving prevention and mitigation of hazard or vulnerability) 3) Risk transfer (related to financial protection and in public investment)” and ex post measure “4) Disaster management (across the phases of preparedness, warnings, response, rehabilitation, and reconstruction after disasters).”
Fiscal imbalances and high debt levels curtail the ability of government to deal with the aftermath of natural disasters (Lopez-Marrero and Wisner 2012).
Microfinancial services refer to microsavings, microinsurance, remittances and transfer payments. Although microfinance in the region is widely defined as microcredit to microentrepreneurs, other microfinancial services do exist, especially related to savings. However, these services are widely ingrained in the mainstream financial sector and are not considered ‘microfinance’, although by definition some are (Lashley 2010).
The accepted vulnerability threshold in the region is 125 % of the poverty line.
The survey data was analysed to determine if there were any differences by sector (Agriculture versus Tourism). Limited differences were seen and where relevant these differences are noted in the text.
The classification of stressor levels is adapted from Watts (1983) who ranked coping mechanisms according to the degree of reversibility and level of commitment of household resources; this classification was later refined by Montgomery (1996) to categorise coping mechanisms as low, medium and high depending on the level of reversibility and level of commitment of household resources. Sebstad et al. (2006) and Cohen and Sebstad (2005) advanced the classification with specific reference to the demand for microinsurance.
Moderate to high demand for the insurance product was 50.9 % for those in Agriculture/Fisheries versus 50.2 % for those in Tourism.
The issue of safety refers to actual safety of funds in relation to regulation and supervision, and perceived safety in relation to the level of trust the individual has in the institution.
For more information, visit www.climate-insurance.org
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Acknowledgements
The data presented in this paper was generated by the “Microenterprise demand for weather-related insurance and risk management approaches in the Caribbean” project undertaken on behalf of the Munich Climate Insurance Initiative (MCII) with funding from the German Development Corporation (GIZ). The authors thank Kristina Yuzva for research assistance and editing.
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This article is part of a Special Issue on "Advancing Climate Change Adaptation and Risk Management" edited by Joern Birkmann and Reinhard Mechler.
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Lashley, J.G., Warner, K. Evidence of demand for microinsurance for coping and adaptation to weather extremes in the Caribbean. Climatic Change 133, 101–112 (2015). https://doi.org/10.1007/s10584-013-0922-1
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DOI: https://doi.org/10.1007/s10584-013-0922-1