Climate Change 2001:
Working Group II: Impacts, Adaptation and Vulnerability
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11.3.3. Institutional and Financial Barriers

As reported in IPCC (1996), the global cost of weather-related disasters to insurers had risen rapidly since 1960 as a result of increased frequency and severity of extreme climate events. The property insurance industry is most likely to be directly affected by climate change because it is already vulnerable to variability in extreme weather events (Dlugolecki et al., 1996). The trend of rapidly growing damage from weather-related disasters has continued. There have been several major climatic hazards in Asia in the late 1990s. There is, however, only very limited penetration of property insurance or agriculture crop insurance in many of the areas that are most affected by recent floods and cyclonic storms. The impacts of flooding are concentrated on the poorest sections of society and people living in marginal areas. There is a need, particularly in Asia, for increased recognition by the financial sector that climate change could affect its future. Climate change can be considered a threat as well as an opportunity for the insurance industry because an increase in risks and perceived risks implies more business opportunities for the sector.

Decisionmaking processes on the choice and capacity of adaptation to the impacts of climate change vary from country to country, depending on its social structure, culture, and economic capacity, as well as the level of environmental disruptions in the Asian region. Institutional inertia, a scarcity of technological adaptation options, and additional economic burdens in developing countries of Asia will be limiting factors for investment in environmental protection and would force people in these countries to face greater risks.

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