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Climate risk management

InsuResilience: Aim and successes

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Following a proposal by the German Federal Government, the G7 countries – meeting in Elmau, Germany, in June 2015 – launched the InsuResilience initiative. The initiative aims to offer insurance against climate risks to 400 million poor and vulnerable people in developing countries by 2020. The scheme involves close partnership between the InsuResilience partners and the developing countries. Civil society, the insurance industry and development banks are also important partners. When the initiative was launched, only around 100 million people in developing countries were insured against climate-related risks.

At the climate negotiations in Paris in December 2015, the G7 states pledged 420 million US dollars for InsuResilience as a first step. BMZ contributed 150 million euros to that sum. This initial funding will enable up to 180 million people to be insured against climate-related risks. At the climate negotiations in Marrakech in November 2016 (COP22), the G7 along with two new partners (the European Commission and the Netherlands) reinforced their commitment and pledged additional funds. The initiative’s funding volume increased from 420 to 550 million US dollars. The BMZ’s additional contribution was 40 million euros.

Why do we need an initiative for climate risk insurances?

Logo: InsuResilience

In the wake of catastrophes, insurance provides timely emergency assistance and a means for reconstruction. While the international community and aid organisations busy themselves  with the arduous task of collecting money, valuable time is wasted. It often takes weeks or even months until those affected receive help. Climate risk insurances can already pay out after a few days. This quick pay out saves lives and property and can help secure development successes. Insurances, therefore, contribute to poverty reduction, sustainable development and, as a consequence, also help tackle the economic root causes of displacement.

Climate risk insurances provide security to the policy holders, who will actually receive help following a catastrophe. By purchasing insurance against a catastrophe, insured persons obtain a legal claim to a replacement of damages suffered. They are no longer in a position of needing to solicit help, which helps them, in turn, to regain their dignity. In this way, insurance can protect the livelihoods of many people that are threatened by climate change.

Moreover, insurances can create incentives for preventive and risk-mitigating behaviour. The process of taking out insurance is based on a systematic and well-founded risk assessment, which can simultaneously serve as the basis for developing adaptation measures and, as appropriate, catastrophe-risk provisioning. By implementing risk-mitigating measures. such as reinforcing the coastline with dykes, the cost of insurance premiums can be reduced.


The initiative’s ambitious goal is to be achieved mainly by expanding established indirect risk insurance facilities and setting up new insurance schemes in vulnerable regions. InsuResilience builds upon experience gained in Africa, Latin America and the Caribbean. Furthermore, climate insurance arrangements are being integrated into national or regional climate risk management strategies and supplemented by targeted measures to develop insurance markets in the above-mentioned regions.

For example, African Risk Capacity (ARC) was founded on behalf of BMZ and the United Kingdom’s Department for International Development (DFID). This indirect insurance facility enables African states to form a risk pool in order to cover themselves against drought. A special feature of ARC is that each government prepares an emergency response plan in which it defines in advance how insurance payments are to be deployed in the event of disaster. This enables supporting the affected population in a particularly quick and dedicated way.


What are the results so far?

The InsuResilience initiative has already achieved a great deal: the financial commitments of 550 million US dollars have enabled existing insurance schemes to be extended and new approaches to be developed.

For example, African Risk Capacity (ARC) has been expanded greatly with support from InsuResilience. To supplement the existing drought insurance, new insurance products providing cover against floods and severe storms are being developed.

The first insured event occurred in 2015, when 1.3 million people affected by drought in Niger, Mauritania and Senegal received insurance benefits such as food and animal fodder to an overall value of 26 million US dollars. This made it possible to save some 500,000 head of livestock. Overall, ARC aims to insure around 150 million poor and vulnerable people against climate risks by 2020.

In the Pacific region, G7 members Germany, the United Kingdom, the USA and Japan have joined with the Pacific island states and the World Bank to found a new Pacific Catastrophe Risk Insurance Company (PCRAFI), after a pilot phase in June 2016. PCRAFI offers insurance products to cover tropical cyclones and earthquakes. Five island states are already policyholders: Cook Islands, Vanuatu, Tonga, the Marshall Islands and Samoa. Many further countries are expected to join in the near future.

The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is now being expanded to Central America under InsuResilience. Nicaragua was the sixth — and also the first Central American country — to join, in 2016. CCRIF’s portfolio of insurance solutions is being enlarged: there are now also policies covering heavy rains.


What happens next?

Starting in 2017, InsuResilience will expand its offering through an array of additional approaches: In order to come closer to achieving the goal of insuring an additional 400 million poor –  particularly vulnerable people – by 2020, we are supporting the following new insurance approaches with the help of resource commitments made at COP22:

  • Forward-thinking planning and the mobilisation of additional resources for the protection of those in need is at the centre of the reform of the humanitarian system. Climate risk insurance can be an important component of ongoing efforts to reform the humanitarian system. The World Food Programme (WFP) is a central player in the realm of humanitarian assistance and is an organisation of significant importance for Germany. In order to make it easier for WFP to enter the field of climate risk insurances, we are supporting them to become insured themselves by the African Relief Capacity (ARC). In the case of damages, additional funds can be paid out, which can then be used by WFP or other humanitarian organisations to provide relief (ARC Replica).
  • Through our engagement with the Global Index Insurance Facility (GIIF), the World Bank will begin to advise insurance companies, policy holders and governments in developing countries about the process of expanding direct insurance solutions. GIIF and the World Bank can draw upon many years of insurance experience with local partners in developing countries to develop and provide tailor-made direct insurance solutions for poor and vulnerable people in Asia and Africa.

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BMZ video about the consequences of climate change and climate risk insurances

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