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 G7 states 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.
The added value of insurance instruments stems from their capacity to buffer the adverse effects of extreme weather events. Climate risks within a community are spread across many shoulders even before potential damage occurs. In direct insurance schemes, households are insured individually against risks such as harvest loss. In indirect insurance schemes, banks or states come together in risk pools.
Climate risk insurance instruments help to close a global equity gap since the provision of assistance is no longer an act of charity: when an insured event occurs, the people affected are no longer petitioners but claimants entitled to compensation for losses incurred. This safeguards the livelihoods of many people who are at risk from climate change.
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 support in the form of emergency aid or reconstruction measures to be provided quickly to the affected population.
The InsuResilience initiative has already achieved a great deal: the rapid action package of 420 million US dollars pledged at the Paris climate conference has enabled existing insurance schemes to be extended.
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. Furthermore, ARC is gaining new member states: Mali, Malawi and Gambia joined in 2016, while other countries are negotiating their entry.
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). 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. Nicaragua was 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.
The G7 partners are currently considering innovative climate risk insurance instruments involving new stakeholders such as humanitarian organisations, microfinance institutions, local governments and non-governmental organisations (NGOs). Options to broaden the geographic scope of the initiative are also under discussion.
The InsuResilience Secretariat in Bonn became operational in August 2016. The Secretariat assists the G7 partners in all the activities that implementation of the initiative entails, such as project development, monitoring and evaluation.
- Press release 07.05.2015:
Germany wants to foster climate risk insurance
- Joint declaration of the InsuResilience partners at the Marrakesh Climate Conference COP 22 (PDF 512 KB)
- Joint declaration on the G7 climate risk insurance initiative "InsuResilience" at the Paris Climate Conference COP 21 (PDF 240 KB)
- Issues: Disaster risk management
- Prepare for the expected: Insurance in disaster risk management – a KfW publication (PDF 73 KB) - external link, new window - Visit website
Disaster Risk Management
Approach and Contributions of German Development Cooperationnew window, PDF 4 MB, accessible 06/2015 | pdf | 4 MB | 40 P. | accessible