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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.

For the United Nation’s World Food Programme (WFP), enabling access to Climate and Disaster Risk Financing and Insurance (CDRFI) solutions is central to fulfilling its mandate to achieve zero hunger through both saving and changing lives. WFP Nicaragua is leading the efforts in the Latin American and Caribbean region to implement a risk-layering insurance approach. A combination of financial instruments is being used to address hazards of varying intensities and frequencies as there is no “one-size-fits-all” formula for risk financing.

Despite the delays that the pandemic caused to the design and implementation of new products, three years after the launch of the first parametric insurance in Colombia, the Microinsurance Catastrophe Risk Organization (MiCRO) and its local partners have been able to provide almost 120,000 beneficiaries with increased protection against the impacts of hazards such as excess rain, drought and earthquakes. In 2019, MiCRO and SBS Seguros Colombia S.A. designed a microinsurance product for Small and Medium Enterprises (SMEs) in Colombia, which has since been offered to Bancamía’s clients and focuses on reaching the urban and rural poor.

Caribbean Catastrophe Risk Insurance Facility (CCRIF) SPC Annual Report 2021/22 describes CCRIF’s activities and accomplishments during policy year 2021/22 as well as their contribution to the seven strategic objectives. The report presents a new Vision as we move toward 2025 and beyond: A leading global development insurer, providing disaster risk financing products and services to member countries to improve lives and livelihoods, building resilience and advancing sustainable development agendas.

The high exposure of Jamaica to natural and climate-related disasters is posing an increased risk to the country’s population as well as its macroeconomic and financial outlook. The Government of Jamaica is addressing this risk by implementing a disaster risk financing strategy that aims to improve the country’s financial resilience through prearranged financing instruments including a contingency fund, contingent credit and catastrophe insurance. Supported by the World Bank, GRiF and USAID, a catastrophe bond provides the Government of Jamaica with USD 185 million in storm protection for three years until December 2023. The country’s first-ever cat bond transaction complements the strategic financing instruments and reduces the country’s financing gap in a cost-efficient way.

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.

Climate change has considerably increased the likelihood of experiencing extreme weather events. Governments in developing countries have a limited capacity to smooth the losses created by extreme weather, and could potentially benefit from the introduction of disaster funds, that is, ex-ante budgeting allocations for post-disaster reconstruction. So far, the implementation of disaster funds has been limited, in part because it is still unclear whether disaster funds provide a cost-effective way of coping with these losses. By taking advantage of the sharp rules that govern the municipal-level eligibility for reconstruction funds in Mexico, this paper provides some of the first estimates of the impact of disaster funds on local economic activity. The main finding is that access to disaster funding boosts local economic activity between 2 and 4 percent in the year following the disaster. Another finding is that the positive impact of disaster funds on local economic recovery can persist for as long as a year and a half after the disaster. Consistent with these findings, we additionally show that access to disaster funding leads to a large and sustained 76 percent increase in the growth of local construction employment. This labour market impact slightly precedes the overall increase in local economic activity.

Developing countries require greater access to finance to respond quickly and effectively to disasters. Multiple tools are available to enable this, including national disaster funds, contingent credit lines, and parametric insurance products. This paper analyzes how a portion of the current disaster risk finance architecture is serving developing countries. We focus on the three regional risk pools— CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) (referred to throughout as “CCRIF”); African Risk Capacity (ARC); and Pacific Catastrophe Risk Insurance Company (PCRIC)—that offer parametric disaster insurance to developing countries.

Caribbean Catastrophe Risk Insurance Facility SPC Annual Report 2018-19 summarizes the achievements and activities for the different programs and projects conducted in the company.