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The obvious impacts of climate change on insurance that easily come to mind are those linked to the coverage of natural catastrophes, such as hurricanes or floods

Nobert Musa Phiri Correspondent
THIS century of ours is characterised by insecurity, by continually growing risks, especially from the sphere of technology, but also from the sphere of human conduct, even from the sphere on natural phenomena.

In recent years, climate change has become a major concern for all mankind. Climate change is real and the only existing debate is on the extent of the impacts on different sectors of the economy, whether it is the energy, forestry or agricultural sector. Climate change has had a profound effect on the insurance sector. The insurance sector is perhaps ready for some natural disasters, but it it’s not ready for climate change, which is a systemic threat.

The obvious impacts of climate change on insurance that easily come to mind are those linked to the coverage of natural catastrophes. However, one also has to consider the growing importance of damages caused by gradual phenomena, such as the progressive increase of sea levels, or the desertification of certain areas. Several types of property insurance are affected (at various degrees depending on local conditions): agricultural insurance (damages to crops, forestry, livestock), insurance of buildings, contents, machinery, equipment, transport and marine insurance, insurance in the tourism industry, business interruption insurance in all sectors.

Life insurance is also affected by climate change concerned. Globally excessive heat, hurricanes, floods and forest fires also have their increased death tolls. Some diseases develop as a consequence of climate change, thus affecting health insurance: depending on the circumstances, climate change can increase the risk of afflictions such as malaria, meningitis, skin cancer, allergies, stress due to excessive heat, malnutrition due to drought, diseases due to water contamination.

In Zimbabwe, recorded temperatures rose about 1ºC over the last 40 years of the 20th century, while rainfall and runoff decreased by approximately 20 and 30 percent, respectively. As a country that depends mainly on rainfed agriculture, Zimbabwe is extremely vulnerable to climate variability and change.

The following are some of the effects on climate change in Zimbabwe:

Droughts: Mid-season dry spells.

Hail: Increased hail incidence during the past four easons.

Heat spells: Temperature is showing a general increasing trend.

Strong winds: Severe storms have become common.

Flooding: Rainfall measuring more than 50mm in 24 hours regarded as a heavy rain day. Now we getting more incidents of flooding in unusual places.

Wild Fires: More common now especially in Manicaland.

The existence of a risk and its transfer from the person who is exposed to it constitute the very basis of every Insurance Contract.

For insurance purposes the uncertainty which underlies the risk does not pertain to any change of a person who is exposed to risk; it pertains more particularly to patrimonial or non-patrimonial loss a person may suffer as a result of the dreaded peril. Risk, as it relates to an Insurance Contract, may be defined as the possibility of harm.

Climate change causes new types of liability to appear. Firms can be held liable for excessive gas emissions, violation of regulatory requirements, failure to disclose information, lack of preventive measures or inadequate handling of accidents.

Members of several professions and trades whose activity can have an influence on climate change can also become liable in certain circumstances, such as architects, contractors experts or manufacturers. Public authorities can be responsible for failing to take adequate preventive measures (sewer systems, dykes . . .)

In Zimbabwe, the Constitution creates a broad framework and recognises the importance of climate change. Section 73 enshrines Environmental Rights>

(1) Every person has the right —

(a) To an environment that is not harmful to their health or well-being; and

(b) To have the environment protected for the benefit of present and future generations, through reasonable legislative and other measures that —

(i) prevent pollution and ecological degradation;

(ii) Promote conservation; and

(iii) Secure ecologically sustainable development and use of natural resources while promoting economic and social development.

(2) The State must take reasonable legislative and other measures, within the limits of the resources available to it, to achieve the progressive realisation of the rights set out in this section.

Zimbabwe has thus accepted the existence and impact of climate change together with the importance of preserving the environment for future generations. Zimbabwe as a State has also committed to the Paris Agreement of 2015 on Climate Change which sets the goal of limiting global temperature rise to 2 degrees Celsius. The insurance sector must, therefore, extensively study and analyse climate change and its impact on insurance business.

The Legislature or the Commissioner of Insurance in Zimbabwe has to come up with reasonable measures which mitigate the impacts of climate change on the insurance business. The Commissioner of Insurance can lobby for improved awareness of climate change by the general public and public authorities.

Reinsurers, together with insurers and insurers’ associations, should also advocate, raising the degree of awareness of climate change issues and to inspire or influence regulation. Insurers and reinsurers should have already begun to take notice of the effects that climate change, and regulations designed to curb it.

Climate change is also considered as an opportunity to take initiatives and to offer new types of coverage designed to meet the new challenges, either by adapting existing policies or by creating new ones such as micro-insurance. Globally insurance companies are paying close attention to climate change, and recognise that it’s in their interest to address the threat.

The call to action on climate change is an urgent one and requires all sectors of society to contribute. Climate change is real and the study of the impact of climate change on insurance is important as it has far-reaching consequences on all types of insurance.

Insurers are dealing with this uncertain environment in a spectrum that runs from direct engagement to, perhaps, complete avoidance. However, avoidance or inaction for whatever reasons could have dire consequences.

Insurance is based on a portfolio of risk assessment, pricing, spreading, and when thought necessary, avoidance. Climate change challenges these functions because the science is uncertain, mitigation and adaptation responses often largely outside insurer control, and regulatory responses.

• Nobert Musa Phiri is a partner with Muvingi & Mugadza Legal Practitioners, Attorney of the High Court and Supreme Court of Zimbabwe. He can be reached on [email protected].