* Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.UK hopes new London Centre for Global Disaster Protection will cut poverty and create business opportunities
The British government's announcement at the G20 summit this weekend of £30 million ($38.6 million) in support to set up a London Centre for Global Disaster Protection – to help developing countries use insurance to access faster and more reliable funding in emergencies - sparked a bit of a storm in the UK press.
A headline in The Mirror, a left-leaning tabloid newspaper, said "millions in British aid" would be funneled "to insurance fatcats to fund premiums for countries prone to natural disasters".
Centre-right broadsheet, The Times, ran a calmer headline - "Britain will buy disaster insurance for poor nations". But it pointed out high in its article that the initiative "risks provoking new controversy over Britain’s aid budget… as uninsured flood victims in the UK demand similar help".
Overseas aid is a touchy subject in the UK press these days, at a time when the British public is struggling with fiscal austerity in the wake of the banking crisis and an uncertain economic future as it negotiates its exit from the European Union. So much so that the Department for International Development (DFID) runs a regularly updated web page where it rebuts what it sees as inaccurate claims about its work in the media.
On Saturday, it pointed to a number of errors in reports about the new disaster insurance centre. They included the amount of money Britain will pay directly to insurance companies for premiums - none, DFID says.
Neither will the centre stump up relief funds when disasters hit – instead, assisting countries to get insurance by providing expert advice and developing science and robust plans for managing risks could unlock up to £2 billion over the next 10 years in fast, predictable pay-outs, DFID says.
At the global level, insurance is widely regarded as a promising way to reduce the world's growing bill for aid in humanitarian emergencies, from people fleeing conflicts to drought-induced hunger.
DFID points out that the economic costs of disasters in developing nations are rising, and since 1980 have been equal to one-third of all official development assistance provided by richer countries to poorer ones in that period.
In rich countries, almost half of all losses are absorbed by insurance, but in poorer countries less than 5 percent are covered, with the rest borne by individuals, businesses and government, slowing growth and forcing people into poverty, the aid department says.
A number of international programmes are already trying to boost insurance coverage in poorer countries. They include African and Caribbean insurance pools offering governments protection from weather and climate disasters, and the "InsuResilience" initiative, led by G7 nations, which aims to increase the number of poor people with insurance coverage for climate-related hazards, via public and private schemes, by up to 400 million by 2020.
PEOPLE AND PROFIT?
The problem for some is that wealthy governments often portray insurance as a kind of "get out of jail free" card - they get to cut their aid bills and their insurance industry benefits into the bargain.
This is perhaps why the London Centre for Global Disaster Protection got short shrift from the left-wing UK media.
Articles cited an unnamed senior Downing Street official who said the long-term aim was for British firms to have the opportunity to make money out of participating countries after the first four years.
DFID responded, saying the aim was to help end poverty and build insurance markets in developing countries that could generate billions of pounds each year in extra national investment to boost their economic development.
It could also boost global prosperity and open up opportunities British insurance firms could compete for, but "DFID is also linking developing countries to insurance solutions that work for them", it emphasised.
The centre's announcement was made as part of a package of support presented as a path to increasing Africa's wealth, lifting millions out of poverty, while offering Britain “greater security at home and significant future trading opportunities”.
It is this argument about benefits for the donor side - made no doubt to dispel the view that aid is all about charity handouts and a waste of taxpayers' money - that can get humanitarians’ hackles up.
Some development agencies like ActionAid have been highly critical of insurance programmes as a way of getting more efficient help to disaster-hit communities, arguing that payouts in places like Malawi haven't reached people on time and can't be a quick fix for the "broken" aid funding system.
This weekend, Oxfam welcomed the new disaster protection centre in London, noting that help often arrives too late.
But its senior policy adviser Max Lawson said harnessing the resources of the insurance industry "is so far untested and must be judged on the benefits it provides for poor countries rather than the City of London”.
There’s the rub - we don't yet know if and how insurance programmes led by the private sector can work for the poorest people on a large scale.
Livestock insurance for drought-hit pastoralists in Kenya, and micro-insurance against typhoon damage in the Philippines, for example, have shown promising results. But the question of whether humanitarian protection can be happily married with the profit motive remains unanswered for now.
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