Climate scheme hands $ 105 m profit to global insurance industry

A climate insurance scheme in the Caribbean has received $ 293 million in premium payments and grants from donors since it began in 2007 but has paid out just $ 131 million in claims. In contrast, $ 105 million from the scheme has gone to private insurance companies as profit.

The figures were released in a new report from the Jubilee Debt Campaign, which shows that disasters linked to climate change leave affected countries more indebted than they were before the disaster hit.

Climate ‘risk’ insurance is being heavily promoted in response to increasing damage from disasters. However, the report argues that the current model – where the insurance is funded by premiums from affected countries – puts the costs back on the victims of climate change rather than those who cause it. Furthermore, insurance is a highly inefficient use of resources. The scheme in the Caribbean, the CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility), has received $ 162 million more in premium payments and grants from donors than it has paid out in claims.

Jubilee Debt Campaign Director Sarah-Jayne Clifton said: “Promoting insurance premiums in response to rising damage from climate change is fundamentally unjust, putting the burden on the victims of climate change, rather than those who have caused it. Furthermore, the evidence from existing schemes is that they are a net drain of resources, taking money away from impacted countries and placing it in the hands of the global insurance industry.” In the report, Jubilee Debt Campaign showed that for the most economically damaging disasters in the 21st Century, in over 80% of cases, government debt was higher two years after the disaster. In only one country did debt fall without debt relief being given. The report has been released ahead of climate change negotiations in Katowice, Poland (3-14 December). Around 80% of the most damaging disasters since 2000 have been tropical storms, with over 90% of them having been in Small Island Developing States, and over 60% being in the Caribbean. In contrast to suffering disproportionately from climate-related disasters, Small Island Developing States have made little contribution to climate change. Twenty-nine Small Island Developing States, with 0.7% of the global population, are together responsible for just 0.2% of global carbon dioxide emissions.

Many small, impoverished states are already heavily indebted. The IMF conducts debt sustainability analyses for 21 impoverished Small Island Developing States. Of these, two are in default, 11 are at high risk of debt default, eight at medium risk and none are at low risk.

Jubilee Debt Campaign are calling for a comprehensive debt relief scheme for small states to get debt down to a sustainable level to allow for better preparedness ahead of disasters hitting, as well as a permanent, effective, and automatic debt relief process in response to disasters.

“It is a moral outrage that those who are most affected by climate change are being made to take on debts because of the disasters that climate change is contributing to. This is on top of the high, unjust debts that many small states already have. We need a comprehensive mechanism to get debts down to a sustainable level, then an automatic debt relief process after disasters hit, so that countries are not locked in a spiral of worsening debts as climate change gets worse,” said Sarah-Jayne Clifton.