Country Requires a Policy Guideline for Climate Induced Risk Transfer Mechanisms

Dhaka, 28 July 2018: Speakers in a study sharing seminar in Dhaka reasoned for a National Crop Insurance Policy to offset/transfer loss of crops and other valuables caused by weather anomalies and associated disaster events.

Center for Participatory Research and Development-CPRD organized this seminar titled “Readiness of the Insurance Sector in Offsetting Climate Change Induced Loss and Damages in Bangladesh” to share its study findings; how the country’s insurance sector perceives climate change-induced loss and damages and the level of preparedness to transfer/offset loss and damages.

Dr. Qazi Kholiquzzaman Ahmed, country’s renowned economist and climate expert, chaired and facilitated the seminar while Dr. M Asaduzzaman, Distinguished Fellow, Bangladesh Institute of Development Studies (BIDS), Dr Nurul Quadir, Additional Secretary, Ministry of Environment, Forest and Climate Change and Dr Sheikh Mohammad Rezaul Islam, Executive Director (Joint Secretary), Insurance Development Regulatory Authority joined the seminar as special guests.

At the onset, Md. Shamsuddoha, Chief Executive, CPRD stated that among the approaches of addressing ‘loss and damages’ the risk insurance schemes and regional risk pooling have gained considerable momentum through the risk insurance is often considered as an inappropriate as well as a flawed mechanism for addressing climate-induced loss and damage. Moreover, the insurance sector in many developing countries, including Bangladesh, lacks capacity, resource and policy guideline to development saleable product affordable by the smallholders.

In sharing study findings, Muhammad Mizanur Rahman, Research Associate, CPRD revealed that among the studies insurance companies only 2.5% have risk transfer schemes, however, all of which are in the primary stages of their development. While risk transfer mechanism is a broadly discussed issue in climate policy discourse, only 30% insurance companies (high officials only) holds preliminary knowledge on risk transfer mechanisms. According to the summary of the key informant’s interviews, 35% pointed out lack of government directives, 30% pointed out lack of institutional mechanism and 30% considered knowledge gap for not having risk transfer schemes in Bangladesh.

Dr M Asaduzzaman considered ‘asymmetry of information between buyer and seller’ as one of the major barriers of implementing crop insurance schemes; he emphasized understanding of the demand side and finding out new indexes like Weather Index and Risk Mapping to make insurance schemes viable. He also suggested harmonization of adaption issue with the safety net as loss and damages can never be fully recovered without enhanced adaptation actions.

In summing up the discussion, Dr. Qazi Kholiquzzaman Ahmed emphasized on the institutional as well as mass people capacity building to tackle the adverse impact of climate change through various mechanisms like insurance, reserve fund, regional pooling etc. He considered data gap as the key challenge to introduce insurance product, therefore, urged concerned departments and agencies to work in a coordinated manner to generate site-specific weather data.  He expressed his high hopes for a well-established climate change risk transfer mechanism in Bangladesh in the future.

Among others, Dr Hamidul Huq, Professor, United International University; Dr Shameem Hassan, Hydro-meteorologist, ADB; Dr. Fazle Rabbi Sadek Ahmed, Director, Climate Change and Environment Unit, PKSF; Mrs. Kawser Parvin, Deputy Director, Bangladesh Meteorological Department; Mrs Khodeja Sultana, Country Director, Diakonia Bangladesh; Mr Shanka Saadi, Mr Bayazid Mostaba, CEO, Paramount insurance, representatives from different Insurance, Bank and Academic institutions spoke in the seminar.

The seminar participants hailed the very first approach of identifying knowledge and capacity gap for introducing risk transfer measures in Bangladesh and argued for a policy directive to strengthen country’s insurance sector to undertake feasible and affordable risk transfer measures.