Loss and damage protection BMZ achievements in climate and disaster risk finance and insurance

Pre-arranged finance mechanisms improve people's ability to protect themselves against climate-related loss and damage, thus strengthening their financial resilience against the climate crisis. When a disaster hits, disbursements provide rapid assistance and protect people from poverty, hunger and overindebtedness.

The Global Shield against Climate Risks was launched in 2022 during Germany's G7 Presidency, in a joint effort between Germany and the V20 (External link) (Vulnerable Twenty, an alliance of about 70 countries that are particularly vulnerable to climate change). The Shield brings together activities in the field of climate and disaster risk finance and insurance, enabling particularly vulnerable people and countries to access assistance more quickly and easily when needs are great.

The Shield builds upon the InsuResilience Global Partnership, an initiative launched by Germany that did valuable groundwork on climate risk finance in the context of comprehensive and active climate risk management. The Partnership facilitated cooperation among governments, the private sector, multilateral institutions, civil society organisations and research institutes.

German activities Permanent protection for particularly vulnerable people

As early as in 2017, during its G20 Presidency, Germany joined forces with the UK, Fiji, Ethiopia and the World Bank to launch the InsuResilience Global Partnership as a joint G20 and V20 (External link) initiative. In its ambitious Vision 2025 (External link), the Partnership adopted the goal of increasing the climate risk and disaster resilience of the most vulnerable populations in developing countries and emerging economies through financial protection.

The Global Shield against Climate Risks, which was established at the 2022 climate conference, builds on this goal and on Vision 2025, making use of the experience and of the networks, bodies and mechanisms of the Partnership. The Shield pursues a coordinated, inclusive approach which brings all major stakeholders from government, civil society, academia and the private sector together to engage in a comprehensive process of analysis and consultancy. That process serves to analyse existing activities, needs and coverage gaps and to identify suitable actions and prioritise them. The country support packages that are developed in this process can be implemented, among other things, via the Global Shield Solutions Platform (GSSP) and the Global Shield Financing Facility (GSFF). Complementing these instruments, the Global Shield Programme for Resilient Risk Pools (External link) (GSRRP) strengthens regional risk pools. This facilitates effective, well-coordinated, long-term protection against climate risks, beyond what had been achieved before.

Finance and insurance solutions

Below, more information can be found on a number of finance and insurance solutions which Germany supports as part of the Global Shield (and previously supported through the InsuResilience Global Partnership). Cooperation with the private sector and the use of private capital play an important role in these solutions. The various tools offer a broad range of options for financial protection against the impacts of extreme weather events. They can be used in a mutually complementary manner.

Natural Disaster Fund (NDF)Internal link

The Natural Disaster Fund (NDF) pools weather risks in developing countries, providing coverage through international insurance and capital markets. Risk capital has been provided both by governments (Germany and the UK) and by the private sector (Hannover Re and MS Amlin). The Fund relies on scientific models and financing instruments to facilitate quick insurance payouts. Its clients include private companies, humanitarian and other non-governmental organisations, and public entities.
Regional risk poolsInternal link

The increasing frequency and intensity of extreme events is posing major challenges to governments and requires affordable options for financial protection. There are four regional risk pools – in Central America and the Caribbean, in Africa, in the Pacific region and in South-East Asia. They provide climate and disaster risk insurance solutions for governments and, in some cases, for other entities as well. Pooling risk coverage can reduce costs, and premium support can facilitate access.
InsuResilience Solutions Fund (ISF)Internal link

The InsuResilience Solutions Fund started out as the key implementation programme of the InsuResilience Global Partnership. It has been supporting, among other things, the development of innovative and sustainable climate risk insurance products in developing and emerging economies in order to improve the resilience of vulnerable households to climate change and natural disasters.
InsuResilience Investment Fund (IIF) & InsuResilience Investment Fund Private Equity II (IIF PE II)Internal link

The two impact funds – the InsuResilience Investment Fund (IIF) and the second fund set up at a later point, the InsuResilience Investment Fund Private Equity II (IIF PE II) – are making it easier for people in developing countries to access insurance and benefit from it. Their investments focus on micro, small and medium-sized enterprises (MSMEs), smallholders and low-income households.
Global Inclusive Insurance Facility (GIIF)Internal link

The Global Inclusive Insurance Facility (GIIF), formerly called Global Index Insurance Facility, supports the expansion of inclusive insurance solutions for climate and disaster risks, enabling smallholders and other vulnerable groups to better protect themselves against crop failure caused by droughts and floods.