“Financial protection of climate change risks”, Mamiko Yokoi-Arai, OECD Directorate for Financial Affairs

1. FINANCIAL PROTECTION
OF CLIMATE CHANGE
RISKS
Task Force on Climate Change Adaptation
11 February 2019
Mamiko Yokoi-Arai, Head of Insurance,
OECD

2. 2
The potential role of insurance in
adaptation
• The potential contribution of insurance to
adaptation:
• Risk quantification
• Risk reduction and mitigation advice
• Price signals/incentives
• Financial protection for individuals,
businesses and governments
• However – the availability of insurance in risky
areas can also exacerbate adaptation
challenges

3. 3
Climate-related losses are increasing…
Source: OECD calculations based on Swiss Re sigma data on natural catastrophes
0
50
100
150
200
250
300
350
Economic losses
(2018 USD bn)
Drought, bush fires, heat waves Floods Storms Linear (Total)

4. 4
…and so is the share of those losses that
are insured (to some extent)…
Source: OECD calculations based on Swiss Re sigma data on natural catastrophes (climate-related perils)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0
50
100
150
200
250
300
350
Share of losses
insured (%)
Losses - 2018 USD
bn
Insured Losses Uninsured Losses
Share of losses insured Linear (Share of losses insured)

5. 5
…climate change will make it more difficult to
achieve high levels of insurance coverage
Source: OECD calculations based on Standard & Poor’s (2015). Estimated damages are for a 1-in-250 year event with and
without climate change.
-20%
0%
20%
40%
60%
80%
100%
120%
Increase in
damage as a result
of climate change
(%)
Tropical Cyclone Flood

6. 6
OECD Insurance and Private Pensions
Committee (IPPC)
Inter-governmental forum for addressing
policy and regulatory issues in insurance
(ministries of finance, insurance regulators)
and industry
Strengthen the capacity of
individuals, businesses, and
governments to address financial
and other risks, including disaster
risks, through enhanced and
robust insurance systems
Objective

7. OECD Recommendation on Disaster Risk
Financing Strategies
7
In 2017, the OECD Council
adopted the Recommendation
on Disaster Risk Financing
Strategies
 High-level recommendations
to address the financial impacts
of disasters on individuals,
businesses and sub-national
levels of governments, as well as
the implications for public
finances.

8. OECD Recommendation on Disaster Risk
Financing Strategies
8
Three core components:
• Quantifying disaster
exposures
• Enabling financial
protection for individuals
and businesses
• Managing the impact on
public finances

9. OECD guidance and analysis on
financial management of disaster risks
9
OECD developed guidance to support financial resilience
against disaster risks for G20 Finance Ministers and
Central Bank Governors (2012)
In 2016, the OECD published a report on the
financial management of flood risk.
In 2018, the OECD published a report on
the financial management of earthquake
risk.
In 2015, the OECD published a global survey on
disaster risk financing practices and challenges
based on a request from APEC Finance Ministers

10. 10
IPPC Programme of Work and Budget:
2021-22 (draft)
• Addressing the implications of a changing
climate
• Assessing implications for insurance
company business models
• Discussing how different perils can
provide lessons to each other in a
changing climate
• Identifying regions at risk of uninsurability
Potential projects for the 2021-2022 period: