Economic policy shapes most international negotiations, including those under United Nations Framework Convention on Climate Change (UNFCCC). However, negotiators often face serious obstacles to understand the full complexity of available policy instruments. A case in point is insurance schemes and climate change negotiations. Insurance schemes have the potential to support adaptation and climate risk management [read more]: Article 4.8 of the UNFCCC and Article 3.14 of the Kyoto Protocol require Parties to consider mechanisms, including insurance, to meet the specific needs and concerns of developing countries in adapting to climate change. Two proposals have been submitted to that effect. Yet progress has been relatively slow, in part due to difficulties in explaining the concepts in ways that engender both understanding and trust among climate negotiators.
Nonlinearities, feedbacks, “side effects” and trade-offs, inherent in risk financing, are not easy to grasp by non-expert audiences exposed only to text, presentations and other unidirectional approaches. How can we devise a communication platform that can successfully convey the complexity, possibilities and risks of complex policy instruments, in this case climate-related insurance systems?
On December 7th an innovative game-based approach was successfully implemented at the UNFCCC Conference of the Parties (COP 16) in Cancun. Under the auspices of the Nairobi Work Programme, about a dozen stakeholders, including government delegates, joined an informal workshop on regional insurance pools and adaptation. The event organizers, including Germanwatch and the Munich Climate Insurance Initiative, decided to support the design and implementation of a game-based session to accelerate learning through a ‘playable’ insurance market.
Well-designed games, like climate adaptation measures, involve decisions with consequences. Games are interactive systems made of rules, goals, narrative content, symbols, and a delivery platform that, together, create meaning. Participants inhabit, enliven and interpret these systems through play, and are compelled to learn how the system works for the sake of pleasure, discovery, competition, and fun.
Various microinsurance initiatives have used games to explain key concepts, elicit data, and even design insurance parameters. The activity described here was inspired by the dynamics and payout matrix of an insurance game developed by Pablo Suarez for Oxfam America, refined with Ulrich Hess and Anthony Patt with funding from the World Food Programme (WFP) and the International Fund for Agricultural Development (IFAD), and tested with subsistence farmers in Malawi and Ethiopia.
A climate change example: a regional insurance pool bundled with credit
The game is designed for 10 to 50 players, and takes about an hour to explain and play. Each participant represents a country vulnerable to extreme events, with countries grouped in 2 to 4 regions. Players start with a capital of three million dollars – represented by three $1 (Mexican pesos) coins. The game is played with real money, and players may accumulate and keep up to $50 during eight consecutive rounds, with each round representing a year. Before the rainy season, players must choose between “business as usual” (which requires no investment and yields $5 in tax revenue by end of the season), or climate-smart, high-profitability activities, which require an investment of $10 but yield $20. Three financial instruments are available to fund or protect investments: Standard loan (must be repaid regardless of disaster occurrence), Insurance (costs between $2.20 and $4 depending on how many want insurance, $11 payout if disaster strikes), and Protected loan (credit bundled with insurance, i.e. repayment only when no disaster occurs).
A roll of the die determines whether or not a disaster hits. If so, all tax revenue that year is dedicated to disaster response, recovery and reconstruction. By the end of each round/year, players need to:
- Spend $4 in government expenses, otherwise they “fail to deliver” (country becomes dependent on humanitarian aid, player abandons game)
- Repay the loan ($10 capital and/or between $2.20 and $4 in insurance premium, plus 10% interest). A default leads to political crisis (player abandons game)
After the eighth round there’s winners and losers:
- The region that has most countries dependent on humanitarian aid loses
- The region that has the most money collectively wins
- The player that has the most money wins
The game combines collaboration and competition, encourages peer-to-peer teaching and discussion, and is deliberately designed to make cheating possible (in insurance, transgressions can and often do happen). The debriefing captured main lessons derived from playing, as well as complexities absent from the game but relevant when designing and implementing real insurance schemes. Participants had a blast engaging in intense deliberations and negotiations, and undergoing several “aha!” moments. Individual and collective strategies evolved with acquired knowledge. One player was caught cheating. Laughter, teasing and bragging were frequent, not your everyday learning atmosphere found in international negotiation settings.
Games for learning complex systems: The way forward
Any complex system that matters to economic policy can, to some extent, be portrayed by a simplified model that captures its essential components, relationships and dynamics. While documents and PowerPoint presentations can help communicate the basics to decision makers, the rich complexities of economic systems can be brought to life by interactive games where participants learn as they make decisions based on rules, goals and well-designed delivery platforms – whether it be a deck of cards, people’s own bodies moving about a conference room, or a website. This approach can be most useful to explain sophisticated policy issues involving insurance, trade, and finance, as demonstrated by Budgetball: a physical game created by the Parsons School for Design and praised by US Treasury Secretary Timothy Geithner, where teams have to earn, save and borrow as they learn about fiscal deficits. Given the challenges of increasingly sophisticated policy instruments, games can and should play an increasing role in raising awareness and capacity building.
Pablo Suarez is a Visiting Fellow at Boston University’s Frederic S. Pardee Center for the Study of the Longer-range Future and a researcher for the International Institute for Applied Systems Analysis (IIASA).