Khartoum, (Sudanow) - Climate Change, Agriculture and Risk Management, through Insurance: A Precise Overview
1 - Introduction
After a long debate, research and discussions, there is now less skepticism over the reality of climate change and continuous discussion on how it will impact the earth`s system and the world population and what can be done about it.
The term “global warming” popularized by the media and activists is just a “sound – bite” and does not accurately reflect the reality of climate change. It involves a general trend of temperature increase but also entails fundamental changes in weather patterns, including change in the persistence and magnitude of sea water events (El Nino), hurricanes, floods, and droughts, as well as fundamental changes in everyday rainfall patterns.
Climatologists and Eco-systems analysts have brought more evidence to conclude that climate change may be greater in marginable than previously predicted. Recent models have predicted average temperature increase of 6 – 7 0C up from previous estimates of 3-4 0 C . Today many skeptics have been silenced by climate data showing the last decade to have been the warmest for the last 1000 years.
2- Climate Change and Agriculture
As far as the interaction between climate change and agriculture is concerned, despite some projected increase in photosynthesis brought about by the increased concentrations in Carbon Dioxide, the change in temperature will have a far greater detrimental effects resulting in
- Significant reduction in crop yield.
- Devastating crop losses.
- Increased incidence of diseases of plants, animals and man
These three effects were materialized in Sudan in general and north Kordufan state in particular.
Climate change is more likely to impact on agriculture genetic resources (plants and animals) through impacts on the distributions of crop and animal wild relatives resulting in serious loss of reserve biodiversity for future use. More than those farmers may drop traditional land races no longer adapted to the local climate, resulting in further genetic erosion. other agriculture- related losses include.
- Loss of life or disability,
- Loss of arable and pasture lands
- Loss of assets in term of real state.
- Loss of jobs.
- Loss of sustainable food supply chain.
If both losses above were valued annually in money terms the results can be so huge contributing directly to poverty, ill-health, decreased manpower productivity as well as human sufferings that will not be recovered even after decades to come. Consequent climate disasters may likely increase losses more than double.
3- Agricultural Insurance in a Climate of Change
Business and science meet in the wake of disasters. The insurance sector serves as a global integrator of climate change impacts across all sectors of the economy. Insurance is part of a broader public- private pathway for spreading risks across time over large geographical areas and among society and social community where climate vulnerability is present. Most of the time, not all climate hazard are insured where it is necessary that the public and private insurers should share the risk.
Climate change insurance provides peace of mind, financial stability, economic development and furthermore, strong cohesion of society at large. It is now evident that virtually all segments of the economy have a degree of vulnerability to the likely impacts of climate change resulting in serious business interruption that might be difficult to recover in reasonable time and at reasonable cost.
Unanticipated climate change in the nature, scale, or location of climate hazards are among the most important threats to the insurance system,. History, in Sudan, has shown that society in general, insurance and regulatory bodies in particular, are often caught by surprise because they are unprepared for these inconceivable disasters. Investing in disasters preparedness is weak and poorly regulated leading to dramatic under-stimulation of society exposure to those climate disasters.
Agricultural insurance against climate change need to be researched, debated and concluded in a magnitude equal to or greater than its eventual impacts.
4- Climate Change Risks
Specific technical risks and uncertainties include the following:
- Shortening time between loss events (frequency)
- Changing absolute and relative variability of losses.
- Changing structure and type of events.
- Damage functions that increase exponentially with weather intensity
- Shifting spatial distribution of events (geographical)
- Abrupt change of losses.
- Single effects with multiple consequences (e.g. loss of capital)
- Widespread natural resources and biodiversity losses.
Delayed or poorly designed intervention (as usual) included extensive human morbidity (exposure to disease and mortality, wild fires , massive crop losses and the disruption of electric power supply.
Specific market- based insurance risks include the following
- Historical predicted premiums behind actual losses.
- Failing to force and keep up with changing customer needs arising from climate change
- Unanticipated patterns of claims
- Responses of insurance regulators
- Reputational risks falling on insurers who do not do enough to prevent or reduce losses.
- Stress unrelated to climate causing unnecessary withdrawal of capital
- Scenarios of loss assessment are usually drawn from the view of the natural sciences with minimum examination of economic implication
- Weak stand of the concept of loss sharing over wider regional and international institutions.
5- Towards a Climate Change Risk Management Policy and Plans
The most troubling finding is that climate change impacts are highly localized and different responses can occur within a few kilometers. Adaptation to climate change cannot, therefore, be regional and must be made locally specific by using farmers knowledge of the past to adapt to future.
A key research theme must be development of risk avoidance strategies which are still difficult. A core research area is the development of improve of germ plasmas of plants and animals whether wild or domesticated. Crops and livestock with good tolerance to heat stress should be identified and promoted.
Innovation may provide farmers with a robust risk avoidance strategy through weather insurance for big farmers and subsidized insurance for poor small- holder farmers. Most appropriate technologies can be developed and tested in one place and transferred from one place to another. If insurance is to remain available and affordable, insurance companies and regulators will need to adapt to climate change through coalition of investors, companies and public interest groups advocating from sustainability standpoint.
6- What to Do?
i. Treat climate change as a corporate – wide strategic issue affecting all functions at all levels and formalize that in a policy statement
ii. Assess how a warming climate will alter extreme weather events, disasters vectors, political risk and infrastructure resilience.
iii. Develop catastrophic models to understand the probable effect of climate change.
iv. Advocate for the reduction of gas emission.
v. Insurance regulators need to take stronger actions in the following
- Continue to mandate annual, public climate risk disclosure by insurers
- Engage with insurers, consumers and other policy makers to better understand the nature of climate change risk.