"The possibility of a one-trillion-dollar-loss year is one scenario out of many, but whatever the precise figures the losses are already large and set to increase."

The trillion-dollar projection comprises total losses -- as compared with only insured losses -- from droughts, storm surges, hurricanes and floods.

It is sketched as a peak year in a scenario stretching until 2040 and is based on the calculation that the long-term costs from extreme natural disaster events are doubling every 12 years.

The figure was compiled by a financial firm, Andlug Consulting, for the United Nations Environment Programme's (UNEP's) Financial Initiative, which gathers UN experts and leading actors in the insurance sector.

In 2002, insurance firms considered 150 billion dollars to be the likely maximum annual cost of big weather damage, said Loster, of Munich Re Foundation, a not-for-profit body that works in developing countries.

But this estimate has had to be massively revised, he said.

In 2005, the cost was 210 billion dollars, 120 billion of which was inflicted by Hurricane Katrina, he said.

"Katrina was the first (weather event) to create climate refugees," said Loster. He noted that the cost of this storm could have been even higher, as the wealthiest parts of New Orleans had been largely spared from the flood.

The report was issued on the eve of a three-day conference of the world's environment ministers, charged with establishing the next steps in tackling climate change. They are meeting to set the seal on the November 6-17 talks under the UN Framework Convention on Climate Change (UNFCCC).

Global warming is the term used to describe the rise in atmospheric temperatures driven by greenhouse gases, the invisible byproduct of burning oil, gas and coal.

Scientists have predicted for years that this temperature rise would begin to affect the climate system, and many -- probably a majority -- are convinced this is already the case.

Few, though, are willing to link a single big storm, such as Katrina, with the long-term phenomenon of climate change, and point out that the economic and human cost of these big disasters has been magnified by development in coastal areas.

In Florida, which bears the brunt of tropical storms which make landfall in the US, the population has risen from three million in 1950 to 15 million today.

So far in 2006, the economic losses from bad weather events have been around 30 billion dollars, led by Typhoon Kaemi, which struck China in July with a nine-billion-dollar whack, said Loster.

Andlug Consulting's scenario noted that so-called great disasters appear in clusters every three years.

"Making allowance for such clusters, and for the inclusion of all costs, it seems likely that there will be a 'peak year' that will record losses of one trillion before 2040. In fact, since so much development is taking place in coastal zones, the figure may arrive considerably before 2040," the report warned.

Drought Insurance Scheme Looks To Expand
Nairobi (AFP) Nov 14 - The world's first weather-insurance policy to help poor African farmers avoid crippling losses inflicted by drought has proven so successful that the United Nations said Tuesday the scheme would be expanded. Weather insurance is traditionally reserved for farmers in rich countries, enabling them to offset some of the losses that can occur from extreme weather events such as droughts, flood and hail.

The pilot scheme, launched in Ethiopia in March 2006, provided insurance for crop failure and loss of livestock if local rainfall levels this year were significantly below historical average.

The policy, purchased from the reinsurance giant Axa Re by the UN's World Food Programme (WFP) with the help of donations from the Ethiopian government and the United States, did not have to pay out at the October 31 deadline as this year's rainfall did not dip below that threshold.

If it had, the WFP would have been awarded seven million dollars to administer relief in the form of food, social services and cash to help 62,000 households in about a dozen most-affected areas.

A severe drought, according to their calculations, would have cost the farmers 55 million dollars.

"The key benefit of this type of insurance-based emergency funding is that it allows for objective payouts and timely interventions," WFP said, in a presentation on the sidelines of the November 6-17 UN climate conference here.

Historical records show an 80 percent correlation between drought and food aid campaigns between 1994 and 2004. And families that become destitute can take around 10 years to recover the loss.

The WFP said the insurance scheme was an innovative way of harnessing market mechanisms to soften the blow from weather-related disasters in poor countries.

The initiative will now be stepped up to a second phase in Ethiopia, and the World Bank is working on a separate insurance scheme in which local farmers can participate.

The UN Environment Programme (UNEP) cautioned, however, that in order to replicate the pilot scheme across Africa, "urgent attention" needed to be paid to developing the continent's meteorological stations.

Reliable weather data was essential for encouraging insurance companies to cover African countries, it said. Weather insurance depends on determining the risk when compared with historical norms.

"Overall, it is estimated that Africa needs 200 automatic weather stations, a major effort to rescue historical data and improved training and capacity building on climate and weather reporting," UNEP said.

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