Insurance against Natural Disasters: A Universal Solution?

In November last year, flooding and landslides devastated British Columbia in Canada. Almost 15,000 people were displaced from their homes, and entire towns were cut off by the floodwaters.

Climate change and an increase in extreme weather events have triggered a surge in natural disasters across the globe. However, when it comes to managing these hazards, at all stages of the disaster management cycle—mitigation, preparedness, response and recovery—wealthier countries perform better than poorer ones. 

One management strategy in particular, whilst heavily relied upon in developed countries, remains largely unexploited in the developing world: insurance. In 2017, nearly 50% of the costs of natural disasters were insured in wealthy countries, whilst in the poorest countries, less than 5% were. The Insurance Bureau of Canada calculated that the November floods in British Columbia caused $450 million in insured damage. 

Poorer countries have difficulty implementing effective insurance policies because it is neither a cheap nor easy affair. This challenge, however, can be overcome with the help of multilateral institutions. They can serve as the middleman between developing countries and private insurance companies in developed countries. Moreover, they can devise and implement mechanisms that will allow for foreign aid supplied by donor countries to cover the cost of insurance premiums. 

Insurance may not make for the most enthralling conversation, but it is a conversation that needs to be had. Here is a solution that can and must transcend the divide between developed and developing countries to help those most in danger.