The study also shows that many affordable adaptation measures are available to decision-makers to address the effects of climate change. The Cayman Islands, for example, could cost-effectively avoid up to 90 percent of expected losses by implementing risk mitigation initiatives such as constructing sea walls and enforcing building codes.

Insurance plays a key role in helping communities to deal with the financial consequences of severe weather events and natural disasters. In Dominica, the study indicates, only 2 percent of the calculated loss can be averted cost-effectively using risk mitigation measures, according to the study.

To address the remaining risk, it is economically more effective to buy insurance than to build more physical defenses.

Swiss Re said it provided analytical support to the project in collaboration with other public and private partners, contributing its expertise in natural catastrophe modeling and risk assessment to quantify climate risks and estimate their potential impact locally.

"The CCRIF study on the economics of adaptation exemplifies how climate adaptation works in practice," said Andreas Spiegel, Swiss Re's senior climate change adviser. "Developing countries can reduce local climate risks by combining prevention and risk transfer measures. CCRIF shows how climate risks can be transferred away from public budgets to the commercial insurance market, thus pre-financing disaster recovery efforts."

CCRIF is a risk pooling facility that is owned, operated and registered in the Caribbean for Caribbean governments. It is designed to limit the financial impact of catastrophic hurricanes and earthquakes to Caribbean governments by quickly providing short term liquidity when a policy is triggered.