Insurance and Risk Management

I suppose you might say my late arrival at the conference was occasioned by my personal risk management.  In other words, I slept late, ate a hearty breakfast,  and had a leisurely morning (I can feel the guilt arising). So after checking the list of side events today (there is a one-day hiatus from plenary sessions), I chose a few of interest and set out on my way to building 14b.

My two first choices turned out to be less than personally interesting, standing room only notwithstanding.  So I happened into a third one which caught my eye in the Daily Programme as being co-hosted by Columbia University, my alma mater.  It was one I had rejected on my initial triage due to the title. Climate Risk Insurance.  For me that title was a non-starter, since I admittedly have the personal bias that insurance companies are the leeches of modern society, draining off the financial life-blood of individuals and organizations in support of their bloated payrolls, buildings, corporate jets and executive salaries and ‘perks’.

So it was a bit of an eye-opener and bias-buster for me to listen to a speaker describe and detail absolutely legitimate matters of managing the risks associated with climate change for subsistence farmers in underdeveloped nations.  I may not be able to reconstruct much of what he presented (when one negates the validity or usefulness of an area one does not develop the intellectual capacity to comprehend the area… thus insurance is like ‘social studies’ to me…), but I will try to give an example.

Say an area or country is prone to a dry year one out of every five.  If that dry year is likely to increase in severity, threatening the farmers with hunger or a catastrophic decline in their level of capacity (more on that in a moment), then a valid approach to risk management would be to construct a program whereby payouts during that bad year can be offset by premiums paid in the ample years.  Too bad pharaoh hadn’t had risk insurance.  But then he might never have met Joseph, and never let the Jewish people go to the promised land.

In addition to any specific programs that might have been discussed at the session (I left early to attend to other matters), even the idea that good minds were seriously engaging the challenges of climate change in the area of adaptation and risk management, and were trying to anticipate the kind of things that could happen and ways of coping with the potentially devastating outcomes that are possible.   An interesting image arose in the talk I feel compelled to share here.  A hypothetical farmer was described and the particular risk mentioned was a year in which yields were so poor that the farmer might be forced to kill and consume his plow animal.  This is the level to which even the insurance industry is searching in its own mission to make a difference.

While things seem to be destined to get much worse, for along time, before the vast inertia and momentum of the global climate system can be set in a right direction, it is of some hope that some of the best minds on the planet are presently working on that huge effort.

For the Earth – §

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