Global Policy Forum

By Mica Rosenberg

Countries plagued by natural disasters should take out insurance policies rather than hoping for humanitarian aid, a top economist and U.N. adviser said on Tuesday.

Jeffrey Sachs, an architect of the United Nations Millennium Development Goals, which include cutting in half the number of people in the world who suffer from hunger by 2015, was in Guatemala to advise the government on disaster relief after the country was hard hit last year by Hurricane Stan. The hurricane killed more than 2,000 people in Central America last October, with mudslides and floods burying entire villages and washing away homes.

The U.N.'s World Food Program has said that nearly 300,000 people in Guatemala could go hungry this year because of damage to agricultural land from the storm. But the program is facing a cash shortfall. It lacks over 40 percent of the international aid it anticipates it will need to feed people in the coming months, a WFP spokesman said.

"This is a pervasive phenomenon I am seeing over the world, that emergency aid appeals don't get listened to," said Sachs, who is head of the Earth Institute at Columbia University, a multidisciplinary think tank that combines natural and social sciences to design poverty reduction schemes. "One idea would be for governments to literally pay a premium to international insurance companies to recoup some kind of settlement and offset damages in the case of an earthquake or a hurricane," said Sachs. He was speaking by telephone on his way to the western department of Chiquimula, where the predominantly Chorti Indian communities are still recovering from a 2001 drought that caused crop failures and famine across Central America.

In March, the WFP signed the world's first insurance contract for humanitarian emergencies with French insurer AXA RE in a deal to cover Ethiopia in the case of devastating drought. The $930,000 policy would pay out over $7 million to Ethiopian farmers if rainfall drops below a certain level during harvest season.

Sachs, who blames weather, geography and disease for much of the world's chronic poverty, thinks the Ethiopian insurance model could be used by countries vulnerable to hurricanes. "This should be an insurable risk, but whether or not the premiums would be too high would have to be explored," he said. "It may have to be to be done with some co-financing from the World Bank." Central America's poor are punished by all kinds of natural disasters, including hurricanes, earthquakes, volcanoes, mudslides, and typhoons, Sachs said. "The question is, do you sit back and watch it as a tragic spectator sport or do you roll up your sleeves and try to do some thing about it?" he said.

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