Exploring And Managing Adaptation Frontiers With Climate Risk Insurance

This chapter aims to inform the Loss & Damage debate by analysing the degree to which insurance can be used as a tool to explore and manage adaptation frontiers. It establishes that insurance can be used as a navigational tool around adaptation frontiers in three ways: First, by facilitating the exploration of adaptation frontiers by contributing to a framework for signalling the magnitude, location, and exposure to climate-related risks and providing signals when adaptation limits are approached. Second, by supporting actors in moving away from adaptation limits by improving ex-ante decision making, incentivising risk reduction and creating a space of certainty for climate resilient development. Third, by aiding actors in remaining in the tolerable risk space by facilitating financial buffering as part of contingency approaches. However, we also find that insurance against the risks of climate change in market terms possesses several limitations. We therefore suggest the embedding of insurance in a comprehensive climate risk management approach accompanied by other risk reduction and management strategies as key principle for any international cooperation approach to respond to climate change impacts.