POLICY BRIEF: Protected against climate damage?


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In autumn 2015, the international community drew up 17 Sustainable
Development Goals (SDGs). These were followed by National Action Plans established at the national level to ensure the goals could be achieved by 2030. However, climate change now stands in the path of achieving the SDGs and will specifically affect the poorest populations in the countries that are most at risk from climate change.

Although extreme weather events such as tropical storms, droughts and floods threaten these people’s harvests, income and livelihoods, climate risk insurance can help to reduce their vulnerability. In the event of a disaster, insurance can quickly provide funds to help the injured parties deal with their situation as well as to bolster emergency responses and strengthen social protection systems.

Despite the opportunities it provides, climate risk insurance has yet to be implemented widely in developing countries. In many places, there is little awareness of risk, sometimes people do not even realise that insurance exists, and if they do, insurances are viewed as too expensive, or the country lacks an appropriate regulatory framework. The InsuResilience initiative, which was founded in 2015 during the German G7 presidency, is an attempt to change this situation. InsuResilience aims to provide 400 million additional poor and vulnerable people with climate risk insurance by 2020. Clearly, risk transfer has now become an integral part of resilience strategies. Moreover, under the German presidency of the G20, InsuResilience could even be expanded to include further stakeholders and instruments as part of a Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions. In addition, the most vulnerable countries – the so called V20 (Vulnerable Twenty) – intend to establish a common risk pool to improve their level of protection.

Be this as it may, if climate risk insurance really is to protect the poorest and most vulnerable populations, it has to focus on people’s needs, be easily accessible and, above all, affordable. The issue of affordability is closely linked to questions of climate justice: who should be viewed as liable for the costs – those responsible for climate change or the people who suffer most from it? Until now, the polluter pays principle has yet to be applied consistently during attempts to tackle climate-related loss and damage. Risk insurance and risk financing, however, could lead this to change. At the same time, solidarity is widely employed in climate risk transfer – a situation in which all insured countries take on the costs of the risks associated with extreme weather events (this is also the case with InsuResilence). InsuResilience is committed to focusing on poverty, and is currently testing options for ‘smart support’ aimed at ensuring that poor people can afford insurance. This focus on the poorest people could be lost, however, if the planned expansion towards a global partnership is not implemented with care.

Bread for the World and ACT Alliance recommend that the German government and the G20 turn insurance into an effective mechanism to better protect poor and vulnerable populations against risks associated with climate change. In order to do so, we recommend: 1) a priority on raising awareness about insurance; legal regulation, capacity building and transparency; 2) integrating climate risk insurances into risk management strategies; 3) implementing the focus on poor and vulnerable populations as guiding principles; 4) reducing the costs of risk financing; 5) progressively ensuring that risk insurance reflects the principles of solidarity and the polluter pays principle; 6) promoting innovation through pilot projects; 7) securing ownership for vulnerable countries and civil society participation; 8) guaranteeing long-term financial support to InsuReslience; 9) ensuring that no support is provided to risk insurances that endanger food security, 10) drawing up guidelines that focus on poverty for cooperation with the private sector, and, 11) addressing the gaps in protection that cannot be closed through insurance.

  • Publisher: Bread for the World
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