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.
Against this backdrop, the topic of climate risk finance and insurance solutions took a prominent role on the agenda of the G20 summit in Hamburg in 2017. In their Climate and Energy Action Plan for Growth the G20 expressed their support for the creation of a Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions with the central objective to increase resilience amongst the most poor and vulnerable people.
In November 2017, the InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions was officially 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. Since the launch, more than 40 diverse partners have signed the Joint Statement and become members of the Global Partnership.
Vision and Objective of the InsuResilience Global Partnership
The vision of the InsuResilience Global Partnership is to strengthen the resilience of developing countries and to protect the lives and livelihoods of poor and vulnerable people from the impacts of disasters by enabling faster, more reliable and cost-effective responses to disasters.
To do so, the Partnership seeks to amplify the impact of ongoing initiatives, develop new climate and disaster risk finance and insurance solutions to help meet growing needs in developing countries, and ensure risk financing is well integrated within a broader dialogue on disaster risk management and humanitarian financing – including in-country systems.
The Partnership furthermore seeks to develop an open and inclusive global multi-stakeholder community of countries, experts and practitioners – from national and sub-national governments, international organizations, private sector, academia and civil society – working on financial protection at the political, operational and strategic level.
Benefits of Climate and Disaster Risk Finance and Insurance
Even with the ambitious mitigation of greenhouse gas emissions, states and societies need to prepare for the unavoidable effects of climate change. Adaptation and disaster risk reduction can reduce but not eliminate negative impacts from drought, floods or cyclones. Poor and vulnerable people in developing countries will be disproportionally affected, especially as they have fewer capabilities to cope and to adapt.
Disaster risk financing tools such as insurance can strengthen rapid response to and recovery from climate and disaster shocks. They protect governments and individuals against risks arising from extreme weather events that are increasing in both frequency and intensity as a consequence of climate change. Taking an ex-ante approach to disaster risk management, including the process of design and implementation of financing and insurance strategies can encourage countries to better understand, own and manage the risks they face.
Climate risk insurance and disaster risk finance allow for rapid emergency assistance and reconstruction, as they can very quickly disburse cash to the policy holder. This saves lives, protects livelihoods and assets and safeguards development gains. Furthermore, 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 gives the people affected agency.
Developing effective disaster risk finance solutions requires ‘risk layering’ to identify which mechanisms are best suited for the different kinds of climate and disaster risks. This includes (1) a coordinated plan for post-disaster action agreed in advance, (2) a fast, evidence-based decision-making process, and (3) pre-planned financing to ensure that the plan can be implemented.
Building on this approach, climate risk insurance and disaster risk finance are most effective when embedded in a country’s comprehensive risk management strategy, aiming to avoid negative impacts as far as possible in the first place. This risk management strategy also needs to be factored into the budget line of a state with the help of risk financing tools, enabling governments to react quickly and effectively according to predetermined criteria in the event of disaster.
Climate risk insurance as one instrument of financial risk transfer can be provided as direct or indirect insurance. In the case of direct insurance, individuals or small companies insure themselves – for example against crop failures. In the event of damage caused by extreme weather they receive direct pay-outs through their insurance. In the case of indirect insurance, governments insure themselves against climate risks, either individually or together with other countries in so-called risk pools. In the event of damage, they quickly receive pay-outs that are disbursed to benefit the affected population, particularly the poor and vulnerable parts.
G7 Climate Risk Insurance Initiative
The InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions builds upon the G7 Climate Risk Insurance Initiative, which was launched at the Elmau summit in 2015.
The overall objective of the G7 Climate Risk Insurance initiative is to stimulate the creation of effective climate risk insurance solutions and markets and the smart use of insurance-related schemes for people and assets at risk in poor and vulnerable developing countries. It aims to increase the number of poor and vulnerable people in developing countries benefiting from direct or indirect insurance by up to 400 million by 2020.
During the 2017 UN Climate Conference in Bonn, the G7 initiative was merged into the InsuResilience Global Partnership which tackles a wider spectrum of challenges, broadens the reach to a wider set of actors and has set additional aims. The G7 initiative will continue to reach its original goal within the framework of the InsuResilience Global Partnership.
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 Global Partnership 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 Global Partnership 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