How climate risk insurance can help protect the poor, #COP21 part 2

4 Dec 2015

After a reported record-breaking 785,000 people across 175 countries took part in the Global Climate March (see some amazing pictures here), 150 world leaders opened the Paris climate summit on Monday with 150 well-intentioned speeches. Then the “brutal negotiations” began in earnest. We are not yet halfway through the conference and there is still an enormous amount of tough work to be done by negotiators to hammer out a deal that all countries are prepared sign up to. Nevertheless, there remains real hope of the first legally-binding and universal climate agreement being struck by next Friday’s deadline.

Along the way, we have already heard some big announcements. The UK, for example, has joined Mission Innovation – a flagship initiative to accelerate investment in clean energy for all – and promised £100 million in 2020 for projects that will help address the energy needs of developing countries and promote low-carbon development. It also pledged a contribution of £30 million in 2016 to the ‘Least Developed Countries Fund’, an international funding mechanism that assists the world’s poorest countries to better adapt to the impacts of climate change. And several governments, although not including the UK – Australia, Canada, France, Germany, Luxembourg and The Netherlands – have agreed to equip 80 developing countries with better climate risk early warning systems.

What’s the news on climate risk insurance? So far, there have been several interesting announcements by the UK Government (including £15 million of funding towards the Pacific regional disaster insurance scheme) and the US Government (pledging $30 million, or £20 million, towards the African, Caribbean and Pacific climate risk insurance schemes), as well as the launch of the United Nations “Anticipate, Absorb, Reshape” (A2R) initiative to protect communities from cyclones, droughts and flooding, including through improved insurance coverage across 30 countries. Businesses are also stepping up, with the global insurance group Lloyd’s committing $400 million (£266 million) of capital towards natural catastrophe insurance in developing countries and inviting development agencies like the UK’s Department for International Development (DFID) to work together.

But the biggest news – we hope – will come at tomorrow’s event at COP21 hosted by the German government, where Secretary of State for International Development Justine Greening has the opportunity to unveil an ambitious financial commitment and action plan for the UK’s contribution towards the new G7 Climate Risk Insurance Initiative.

This initiative, “InsuResilience”, was launched earlier this year and aims to bring climate risk insurance to 400 million people by 2020. So far, only the German government has actually committed funding towards it (of €150 million, or around £110 million).

Tomorrow is a golden opportunity for the UK to really step up its existing work on climate risk insurance. The Government should ensure that the poorest and most vulnerable people, including women and girls, truly benefit from these efforts. In particular, we want to see the UK prioritise the needs of smallholder farmers by significantly increasing its funding for weather-indexed microinsurance programmes. As we saw in last week’s blog, it’s the world’s 2 billion small farmers – many of whom are women – who are among those most vulnerable to the growing impacts of climate change.

The great news is that, through numerous pilots and relatively small-scale weather-indexed microinsurance schemes that already exist, we have now have an increasing amount of evidence about what works well and how donor funding can tackle the biggest remaining problems. For example:

  • We know that the UK should provide financial support for struggling smallholder farmers who would otherwise be unable to pay the full premiums to enable them to benefit from these schemes.
  • We know that donors will need to work very closely with a range of partners, including domestic governments, farmers’ groups, NGOs and other networks who are trusted by remote and vulnerable rural communities, as well as organisations already providing farmers with small loans (such as microfinance institutions and banks) and inputs like seeds and fertiliser. Some of the most promising avenues for reaching millions of small farmers are through bundling insurance together with loans and inputs.
  • And lastly we know that they will need to recognise climate risk insurance not as a silver bullet, but as one useful tool in a bigger toolkit. Insurance should be part of a holistic approach, as highlighted in the successful R4 Rural Resilience Initiative in Ethiopia and Senegal run by Oxfam America and the World Food Programme, where microinsurance is one of a combined package of four activities. Another promising avenue is integrating climate insurance into governments’ national social protection schemes, as currently happening in Ethiopia, through the Productive Safety Net programme, and in Kenya, through the Hunger Safety Net programme.

The time is right to extend the reach of weather-indexed microinsurance from tens of thousands of farmers here and there to millions worldwide. RESULTS will be watching for an ambitious commitment by the UK at COP21 tomorrow to play its part in achieving this.

 

 

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