Understanding Climate Risks – What does it mean for San Salvador?

The report illustrates the importance of climate risk analysis as an essential instrument of comprehensive climate risk management on the basis of results of a San Salvador case study. Including insurance in the analysis further shows the relevance of insurance and the incentives insurance can set for complementary adaptation measures. For the case study of San Salvador, answers to the most urgent questions regarding climate risks are being provided, including insurance as part of a comprehensive climate risk management approach.

A joint side event with UNU-EHS, IDF and ETH Zürich presenting this topic in more detail was hosted at COP25 in Madrid, entitled “Decision for Action – Perspectives on implementing evidence-based climate finance”.

The IDF’s Risk Modelling Steering Group provided quality assurance on the approach, and helped to write the paper. The approach was to run a Climada model through the Oasis Loss Modelling Framework to derive financial loss metrics, as part of an ‘Economics of Climate Adaptation’ study. The aim was to understand the effect re/insurance would have on the losses sustained by the risk owner, as part of a holistic approach to risk management policy. The paper makes the connection between investment in risk prevention and significantly reduced insurance premiums, and suggests the following benefits of insurance at the city/country policy level:

• supports the definition of a climate strategy
• incentivises the implementation of climate policy
• leverages private capital for climate adaptation.

Report available here