Geoscience Reference
In-Depth Information
The Arab Spring owes its origins to rising food prices and can be traced back to the
Tunisian street vendor, Mohamed Bouazizi, setting himself on fi re in protest against
bribery and unaffordable food prices. The eventual death of Bouazizi, two weeks
later, toppled Ben Ali from power and led to unrest in neighbouring Arab states.
Thus, we can see how unpredictable weather patterns can affect crop yields and
livelihoods and contribute to the spark of protest that eventually results in major
political and social change in one of the most important regions of the world.
Insurance is fast becoming a mechanism for facilitating disaster risk management
and for building adaptive capacity to address environmental change. Recent devel-
opments suggest that the international community views insurance as being key to
effective disaster risk management (World Bank 2010 ). The Hyogo Framework for
Disaster Risk Reduction was adopted in 2005 to establish disaster risk reduction as
central to sustainable development (UN 2005 ). The Bali Action Plan, agreed under
the UN Framework Convention on Climate Change, argues for risk sharing and
transfer mechanisms including insurance (UNFCCC 2007 ), as offering a potential
entry point for the insurance sector to become more involved (UNISDR 2011 ).
Early warning systems are crucial for developing equitable approaches to sharing
risk. Insurers and the international donors that sponsor insurance programmes benefi t
from early warning systems that have the potential to reduce risk, minimise losses
and lower the cost of insurance. The insurance industry will need to help address a
number of environmental challenges in the future, including the management of risks
associated with disasters and extreme weather. The adoption of mathematical model-
ling tools for forecasting risk profi les can complement traditional historical data
analyses and help to ensure that the insurance industry remains sustainable.
17.2
Integrating Science and Policymaking
Regulation is increasingly focused on model-based risk assessment. The European
Union Directive, Solvency II, scheduled for January 2016, is already encouraging
insurers operating in Europe to adopt a risk-based approach for its capital require-
ments. 1 This development will ensure that environmental science, risk analysis, capi-
tal modelling, ratings, regulation and public policy are strongly interconnected. The
need to reduce the risk of catastrophic losses is being tackled by a combination of
fi nancial stress testing, regulation and the development of metrics for measuring per-
formance. Rather than dwell on the additional costs imposed by additional regulation,
it may be more strategic to concentrate on the opportunities that this new paradigm
will bring. Solvency I was primarily focused on the capital adequacy of insurers and
did not include requirements for risk management and governance of fi rms.
Big data is revolutionising the way we make decisions and infl uence policy.
Widespread digital sensors, data collection and global interconnectivity currently
provide a rich source of information for quantifying risks using models, as well as
1 Directive 2009/138/EC of the European Parliament and of the Council.
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