InsuResilience Direct climate risk insurance solutions

This factsheet explains the benefits, challenges and limitations of direct climate risk insurance schemes. The concept of “climate risk insurance” denotes the application of insurance instruments to risks associated
with climate change. In direct insurance schemes policy
holders such as micro, small and medium enterprises
(MSMEs) or individuals pay a regular premium in
exchange for a pre-defined payout or damage compensation in case of extreme weather events such as
drought, storm, or flood. Policies are often sold at the
local level and retailed through a variety of channels,
including agribusinesses, financial institutions such
as agri-lenders, banks, farmers’ cooperatives or local
insurance companies and their agents. Payouts can
serve various purposes, e.g. purchasing food to compensate harvest losses or payment of school fees.