Climate change increases the frequency and intensity of extreme weather events worldwide. Its impacts on lives, livelihoods, and assets are not evenly distributed and threaten efforts to sustainably reduce poverty. Disasters force 26 million people into poverty each year. The cost of responding to disasters will continue to increase and force countries to frequently divert longer-term development finance into short-term response measures. Hence, there is a need to shift from reactive crisis management to investing in prevention, early preparedness and action.
Disaster risk finance and insurance solutions, when used as part of a comprehensive disaster risk management approach, can enable more resilient economic development and help protect lives, livelihoods, businesses, infrastructure, and public finances by strengthening disaster preparedness, rapid response, and recovery.
In November 2017, the InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions was launched at the UN Climate Conference COP23 in Bonn. It brings together G20 countries in partnership with the V20 nations, as well as civil society, international organizations, the private sector, and academia. The Partnership builds on the efforts of the G7 InsuResilience initiative on climate risk insurance, which was launched at the Elmau summit in 2015.
The central objective of the Partnership is twofold: to enable countries to carry out more timely and reliable post-disaster response, and to enable them to better prepare for climate and disaster risk through the use of risk finance and insurance. Meeting these goals will reduce humanitarian impacts, help poor and vulnerable people recover more quickly, and strengthen local resilience over time.
What is Climate Risk Insurance?
Climate risk insurance is an instrument of financial risk transfer that provides security against risks arising from extreme weather events that are increasing in both frequency and intensity as a direct consequence of climate change. The mechanism can offer governments, institutions, enterprises and individuals insurance against loss of life, livelihood and assets caused by extreme weather events.
Even with the ambitious mitigation of greenhouse gas emissions, states and societies need to prepare for the unavoidable effects of extreme weather events, exacerbated by climate change. Adaptation and disaster risk reduction can reduce but not eliminate negative impacts. Poor and vulnerable people in developing countries will be disproportionally affected, especially as they have fewer capabilities to cope and to adapt.
Innovative solutions of risk transfer, such as climate risk insurance, help to prepare for these risks. Insurance is not a stand-alone measure but is most effective in combination with adaptation and disaster risk management, in order to avoid negative impacts as far as possible in the first place.
Climate risk insurance protects people, enterprises and states from the adverse effects of climate-related extreme weather events such as droughts, floods and tropical cyclones and reduces the burden, as risks are spread across many shoulders even before potential damage occurs.
Climate risk insurance allows for rapid emergency assistance and reconstruction, as it can very quickly disburse cash to the insured party, for example to a government, in the aftermath of extreme weather events. This saves lives, protects livelihoods and assets and safeguards development gains.
Climate risk insurance instruments help to close a global equity gap. When an insured event occurs, the provision of assistance is no longer an act of charity but puts the people affected in the driver’s seat.
In 2016, the InsuResilience Secretariat was established in Bonn, Germany, as a support unit for the multi-stakeholder partnership. It is hosted by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German Federal Ministry for Economic Cooperation and Development.
The Secretariat supports the development of pro-poor and demand-led climate risk insurance solutions in developing countries and enhances the visibility of the InsuResilience Global Partnership. It fosters communication and cooperation among all the relevant actors of the Partnership, facilitates knowledge management and ensures progress and target achievement. The Secretariat supports the Partnership in all tasks and serves all stakeholders equally – donors and partner countries as well as actors from politics, the private sector, civil society and academia across the globe.
Get in touch with the Secretariat
The InsuResilience initiative has a unique focus on providing climate risk insurance for poor and vulnerable people in developing countries. Extreme weather events disproportionally harm the poorest: in proportion to income, poor people lose more assets than non-poor, while possessing fewer resources and capacities to cope. Therefore, they are at high risk of falling back into or being trapped in poverty in the aftermath of extreme weather events. Climate risk insurance can help them to escape this vicious cycle of poverty. It helps people to reduce their vulnerability and better manage their resources, as they can focus on useful activities rather than having to engage in risk-minimizing activities.
This safeguards the livelihoods of many people who are at risk from the adverse effects of climate change.
Based on a study by the Munich Climate Insurance Initiative (MCII), the target group of the InsuResilience initiative is defined as follows:
1. Extremely poor: people living on less than 1.9 USD PPP / day
2. Moderately poor: people living on 1.9 to 3.1 USD PPP / day
3. Vulnerable: people living on 3.1 to 15 USD PPP / day
Monitoring & evaluation framework
Within the InsuResilience monitoring and evaluation (M&E) framework, climate risk insurance schemes that are supported by the initiative have to be monitored in respect of their contribution to the goal of the InsuResilience initiative. The M&E framework intends to establish a globally accepted quality-based approach for the monitoring of existing and new InsuResilience schemes.
The monitoring and reporting system is currently being developed with the primary goal of tracking the number of poor and vulnerable people with insurance coverage in a transparent and accountable manner. The data collected will be analysed and reported to the donor states and the public.
The core element of the reporting is to reveal and make transparent how data and information are collected, assessed and used to calculate the beneficiaries of each scheme or project. This will also enable, in a next step, schemes to be measured with regard to their effectiveness and impact, not only in quantitative terms (tracking the numbers) but also with regard to their impact on strengthening resilience.