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The 2022 Climate Risk Insurance Annual Report of the World Food Programme (WFP) highlights key insights and achievements from WFP-supported Climate Risk Insurance (CRI) programmes. It provides deep dives into WFP-supported CRI programmes in each country, as well as stories from the field, interviews with partners, and insights into how WFP promotes gender equality and women’s empowerment in its programmes. In 2022, WFP provided financial protection to over 3.8 million people across 21 countries in Africa, Asia, Latin America and the Caribbean, through climate risk insurance instruments. In regions affected by droughts, floods, and hurricanes, these insurance products provided much-needed payouts to support 1.8 million people with a total of US$12.6 million.

While the Central Highlands in Vietnam are the largest production hub for coffee in the country and the largest Robusta coffee producer in the world, the region remains the second poorest region in the country. This makes it even more difficult for local smallholder farmers to build resilience against the increasing impacts of climate change. With the aim of reducing their vulnerability, the Alliance of Biodiversity International and CIAT together with partner organizations is piloting a Coffee Climate Protection Insurance (CCPI) scheme to enhance the capacity of smallholders and agribusinesses to cope with climate variability and change. The scheme incorporates the use of forecasts into agro-advisories, and an integrated index insurance approach for drought, excessive rainfall and temperature for coffee farmers to reduce risks and encourage good farm-management practices.

Increasing the resilience of smallholder farmers against flood events through index-based insurance in Nepal. Check out how a partnership headed by Practical Action and co-funded by the InsuResilience Solutions Fund (ISF) is developing an innovative index-based insurance approach for flood-prone communities in western Nepal.

Developing countries and small economies are facing the prospect of more frequent and devastating compound shocks, defined as multiple disruptive events—including natural disasters, economic and financial crises, and pandemics—striking simultaneously or in rapid sequence. Compound shocks are more devastating than isolated shocks. In many countries, compound shocks are taking place in a context of already tight fiscal constraints and financial fragility. The disaster risk finance architecture has evolved to respond to a growing diversity of shocks, but gaps remain. This note builds on WRI’s 2019 study (https://www.wri.org/publication/disaster-risk-pooling) on the future of disaster risk pools in developing countries which provided three broad options for strengthening the disaster risk finance architecture. This note provides more detail on how two of those options might be operationalized and adapted to a changing context.

Is index insurance an effective tool to manage climate-related disasters? The climate has always presented a challenge to those whose livelihoods depend on it. For poor people, a variable climate presents a risk that can critically restrict options and so limit development. This document looks at the risk assessment tools such as index insurance that can be used to help vulnerable people deal with climate change. Index insurance, which can be applied across a diverse range of weather-related risk problems, from loss of crops due to drought, to loss of livestock, to losses resulting from hurricanes, offers new opportunities for managing climate risk in developing countries. If designed and introduced carefully, the authors emphasise, it has the potential to contribute significantly. However, this potential has some significant challenges that must first be addressed. The introduction of index insurance also reflects a growing interest in, and a move towards, market-driven solutions to poverty-related problems. There would be a shift in responsibilities from public agencies, which ‘provide’ interventions to ‘beneficiaries’, to market-based mechanisms where people choose the services and technologies they prefer. Public–private partnerships and private-sector development are key to this approach. Also issue discussed in this paper is the debate about whether index insurance can contribute to climate change adaptation strategies in developing countries. The authors argue that one way in which index insurance might help build adaptive capacity is by providing a mechanism to help people access the resources needed to escape climate-related poverty. The publication highlights a range of case studies from Malawi to Mexico to the Caribbean, which captures the challenges they encountered and the lessons they have learned. In conclusion, the authors note a number of lessons learnt and present recommendations to further improve the effectiveness of index insurance. These include: low data quality and quantity restricts the implementation and scale-up of index insurance. It is important to improve data systems and explore new technologies to fill data gaps index insurance works best when integrated into broader programs for development and disaster management. It should form part of a comprehensive risk management package with complementary resources targeted to other components of the package investments in capacity building and marketing are needed to support the scaling up of index insurance evaluations are needed to find out if there is a real impact on poverty, and to improve the products. Evaluation and impact studies should be built into future project design and implementation insurance must be demand driven and locally owned. Risk and needs assessments should be carried out before designing and implementing a project index insurance can help vulnerable populations better manage climate risk, and could be a useful strategy for climate change adaptation. Index insurance should be investigated as an adaptation strategy governments should prioritise the development of a strong legal and regulatory system for index insurance.

“Protecting the Poor: A microinsurance compendium, volume II” is a unique collection of recent practices and emerging ideas in microinsurance. It covers the numerous innovations that have emerged in recent years to meet the challenges of providing insurance to low-income people, from new products and delivery channels to consumer education tools, while examining institutional changes in regulations, providers and schemes. As the microinsurance community dramatically evolves and millions more low-income households have access to better insurance cover, this timely second volume will be an invaluable resource for policy-makers, insurers, academics and NGOs. ILO and Munich Re Foundation, Publishers

The Asia-Pacific region is one of the most vulnerable regions to climate change impacts because millions of people in the region dwell in rural areas, are poor households and are dependent on agriculture and related sectors for their livelihoods. Addressing climate change impacts for these communities requires moving away from business-as-usual practices towards practices that have high net positive benefits in terms of disaster risk reduction (DRR) and climate change adaptation (CCA). Risk insurance has been advocated as a practice that has high potential to provide these benefits. However, the current insurance approaches are not achieving their expected potential due to a variety of factors that are embedded in the traditional notions of risk spreading, institutional imperfections and lack of innovation. The reported insurance benefits are largely hypothetical and there is a dearth of evidence for insurance benefits from actual community-based insurance initiatives. Measuring the DRR and CCA costs and benefits of various forms of insurance can help in identifying the most effective insurance approach and help put insurance among the basket of risk mitigation options suitable to the most vulnerable and ultra-poor people.

The report reviews CARE’s experience with microinsurance through seven case study examples across its global programmes. Case studies presented cover climate risk insurance, such as livestock and crop insurance, but also other social microinsurance products that, whilst not categorised as “climate insurance,” provide relevant lessons. Case studies include: (1) CARE Kenya – micro health insurance; (2) CARE Kenya – index based livestock insurance; (3) CARE Ghana – micro funeral insurance; (4) CARE Bangladesh – health insurance; CARE India – a bundled insurance product for multiple risks; (6) CARE Nepal – crop, livestock and health insurance; and (7) CARE Tanzania – multi-peril crop insurance. Each case study presents an overview of the scheme, the project successes, challenges, lessons learned, and ‘big picture’ reflections. CARE’s experience with insurance covers varying risks, ecologies, and contexts. The case studies provide examples of schemes addressing climate and social risks, that have been standalone projects or part of a larger intervention, that have worked with both government and private sector schemes, and that have supported the design of new products or increased access to existing products.

An analysis of the current status of Climate and Disaster Risk Insurance (CDRI) has been developed by the MSC (MicroSave Consulting) in collaboration with the Gesellschaft für Internationale Zusammenarbeit (GIZ), and the Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI-Asia), together with the InsuResilience Secretariat which shares first findings of the CDRI landscape in Asia and the Pacific.The study focuses on 22 countries located in Asia and the Pacific region. The study identified four key markets of Bangladesh, Indonesia, the Philippines, and Vietnam for greater focus because of their high vulnerability to disasters in general, while offering a contrast in approaching disaster risk financing given that the different nature of disasters that afflict these markets.

The Philippines is highly exposed to climate and disaster risk, where the impact of disasters is often most devastating in cities, given their concentration of people and economic activities. Whilst city governments are at the forefront of disaster risk management, they often face funding shortages due to restricted financial flows or lack of budgetary allocation. The Asian Development Bank (ADB) is supporting the introduction of a city-level disaster insurance scheme to increase the ability of city governments to respond quickly and effectively to disasters, through funding support from the Asia-Pacific Climate Finance Fund (ACliFF).