Implications

I conclude that the preceding analysis poses at least seven implications for the ongoing negotiations under the rubric of the Climate Change Convention.

First, it is clear that the consequences of inevitable gradual sea level rise due to climate change induced by global warming will not be insurable on the world's insurance markets. Second, even in the case of the 'abnormal' catastrophic consequences of climate change and sea level rise - floods, inundation, storms, windstorms, hurricanes, tropical cyclones, typhoons insurers already acknowledge that there will be a substantial shortfall in their coverage of losses in the future. Insurers are already forced to decline to insure certain risks in particular areas and increasingly they will be forced to refuse to insure risks in the geographical regions most prone to catastrophic loss. As a result they will have to impose deductibles, limit the total amounts of their liability on individual risks and limit their liabilities in the aggregate.

If as predicted the incidence of catastrophes resulting from the combination of sea level rise, severe storms and storm surges increases substantially, a large proportion of catastrophic losses will be uninsured and indeed uninsurable on the world's insurance markets. The insurance industry recognises that even in the case of catastrophe insurance, government intervention will be necessary.

Third, losses of such magnitude cannot be carried by the governments of those countries most vulnerable to these hazards - the small island and lowlying coastal developing countries. There is a need for an internationally funded insurance pool.

Fourth, the oil pollution and nuclear damage Conventions referred to in this paper provide examples of international insurance pools that have been set up in other contexts. One is funded by the oil industry, the other by States on a basis which takes account of gross national product and nuclear energy capacity.

Fifth, the basis for contribution to an internationally funded insurance pool in the present context, and the criteria to be satisfied in claiming from such a fund, should form part of the negotiations leading to the Climate Change Convention.

Sixth, such an international insurance pool might be funded by the developed countries on a contribution basis related to gross national product and/or greenhouse gas emission levels and/or by the industries of such countries responsible for such emissions.

Finally, the Ministerial Declaration at the Second World Climate Conference recommended, inter alia, that stepped-up financial contributions be provided by developed countries to address the particular problems and needs, including funding, of low-lying coastal and small vulnerable island countries. Such countries must be the principal beneficiaries of an internationally funded insurance pool set up to cover losses resulting from sea level rise and related catastrophic events stemming from climate change.