THE CLIMATE RISK INSURANCE INITIATIVE

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1 THE CLIMATE RISK INSURANCE INITIATIVE

2 InsuResilience at a glance The InsuResilience Climate Risk Insurance Initiative was adopted by the G7 partner countries Germany, France, Italy, Japan, Canada, the United Kingdom and the United States in June 2015 at the G7 summit in Elmau. InsuResilience seeks to increase insurance cover age for extreme and adverse weather events by facilitating access to direct or indirect insurance for up to 400 million poor and vulnerable people in developing countries by At COP21 in Paris, the G7 partners committed to provide more than USD 420 million in initial funding for InsuResilience, allowing the provision of climate risk insurance cover for up to 180 million additional people. InsuResilience builds upon a broad range of stakeholders, including local and global insurers, providing strategic, technical and/or financial inputs. This concerted effort enables more effective design and implementation of sustainable insurance solutions. GOALS 2020: 400 million Additional beneficiaries by 2020 Indirect insurance Direct insurance 45 million 55 million 100 million Beneficiaries as of June 2015

3 The risks of weather and climate extremes increasing frequencies and intensities Climate change increases the frequency and intensity of extreme weather events worldwide. Its negative impacts, however, are not evenly distributed. Developing countries and the poorest people are disproportionally affected because of higher vulnerabilities and lower capacities to cope. On average, developing countries incurred USD 8.1 billion of weather- related disaster losses annually during the last decade. If no measures are taken, the impacts of climate change are projected to further increase economic losses and to jeopardise development gains. PREPARATION FOR RISKS AND RISK COVERAGE THROUGH InsuResilience More storms, droughts, and floods as well as sea level rise USD 8.1 billion annual damage in developing countries alone* Livelihoods (agriculture, fisheries, water supply) and infrastructure at risk More and more people, Low coverage by climate risk insurance Africa Risk Capacity (ARC) Pacific Catastrophe Risk Assessment & Financing Initiative (PCRAFI) Caribbean and Central American Catastrophe Risk Insurance Facility (CCRIF) Least prepared quintile *Munich Re 2013 Most prepared quintile Missing data infra structure and enterprises are exposed to climate risks. To limit the damages from extreme and adverse weather events, we need to take comprehensive approaches to risk management.

4 » We will intensify our support, particularly for vulnerable countries own efforts to manage climate change-related disaster risk and to build resilience. We will aim to increase by up to 400 million the number of people in the most vulnerable developing countries who have access to direct or indirect insurance coverage against the negative impact of climate change-related hazards by 2020 ( ). To do so we will learn from and build on existing risk insurance facilities «G7 Elmau Leaders Declaration, 8 June 2015 The goal of InsuResilience access to insurance for an additional 400 million people In June 2015 the G7 launched InsuResilience the Initiative on Climate Risk Insurance to reach an additional 400 million poor and vulnerable people. As of the start of InsuResilience, only about 100 million poor and vulner able people in Africa, Asia and Latin America are covered by climate risk insurance facilities. At the UN Climate Change Conference in Paris 2015 (COP 21), the G7 partners committed to provide USD 420 million initial funding for Insu Resilience, known as the rapid action package, allowing the provision of climate risk insurance cover for up to 180 million addi tional people.

5 Complementing climate risk management the role of climate risk insurance While mitigation of greenhouse gas emissions is essential to reduce the magnitude of climate change, adaptation to changing climatic conditions and disaster risk management further reduce the risk of negative impacts. Examples include construction of climateresilient infrastructure, capacity development for risk informed land-use planning and improvement of early warning systems, etc. Attempts to adapt cannot eradicate all climate risks. Climate risk insurance addresses residual risks by transferring these to third parties, e.g. the insurance market, either through indirect or direct insurance schemes. InsuResilience expands indirect insurance schemes. Therefore, the risk-bearing capacities of existing insurance schemes in Africa, the Caribbean and Central America are increased and new insurance facilities will be founded in Asia. Indirect schemes insure intermediaries like municipalities or national governments. Individuals benefit indirectly, e.g. from food distribution financed by rapid insurance payouts. Insurance allows governments to avoid reallocating budgets and provide faster and more cost-efficient support than humanitarian aid. INSURANCE INTERMEDIARY BENEFICIARY InsuResilience develops and promotes direct insurance schemes. INSURANCE BENEFICIARY Direct schemes help individuals or businesses by transferring their risks to an insurer. Fast insurance payouts help to cover losses of affected individuals in case of an extreme weather event. InsuResilience complements its engagement with supporting measures to ensure comprehensive climate risk management. Climate risk management measures include improving climate data and information systems, supporting contingency planning and raising awareness for climate risk insurance solutions among affected populations and political and private stakeholders.

6 Quickly reaching scale rapid action for the poor and vulnerable To reach the ambitious goal, InsuResilience partners work with governmental partners from developing countries, the insurance industry, development banks, research institutes and civil society actors to boost existing and spur the creation of new direct and indirect insurance schemes in order to promote insurance coverage. STRENGTHENING INDIRECT RISK INSURANCE FACILITIES AFRICA AFRICAN RISK CAPACITY (ARC): PACIFIC PACIFIC CATASTROPHE RISK INSURANCE FACILITY (PCRAFI): CARIBBEAN & CENTRAL AMERICA CARIBBEAN CATASTROPHE RISK INSURANCE FACILITY (CCRIF): Offers drought insurance for mem ber countries of the African Union combined with early warning systems and contingency planning. ARC is currently expanding the climate risk insurance scheme to new countries and developing new products against floods and tropical cyclones. Investments: USD 180 million Beneficiaries: 150 million New climate insurance facility covering tropical cyclones and earthquakes in qualified Pacific Island Countries (PICs). The partners GER, JAP, UK and USA have partnered with the World Bank and the PICs to found PCRAFI which is now expanding to include further countries. New products will also be developed. Investments: USD 35 million Beneficiaries: 1.7 million Insurance scheme covering tropical cyclones and earthquakes in Caribbean small island states. CCRIF is currently expanding from the Caribbean to Central America and new insurance products to cover excess rainfall and cyclones are under development. Investments: USD 75 million Beneficiaries: 2.2 million With the aim of establishing sustainable insurance schemes, market barriers will be addressed, e.g. through: Embedding risk insurance within comprehensive risk management frameworks; Increasing the accessibility of meteorological data; Creating enabling frameworks and incentives for local and international insurers to engage in climate risk insurance markets and to provide risk capital. In addition, InsuResilience will empower the poor and vulnerable as well as their governments through improving their financial literacy, risk assessment and management skills.

7 The way forward for InsuResilience Currently InsuResilience partners are exploring insurance solutions with new actors, such as humanitarian organisations, microfinance institutions, cities and NGOs. Potentials for expanding InsuResilience to new regions are also explored. Natural Disaster Fund (NDF) enables cities, non-governmental organisations and micro finance institutions to access climate risk insurance. The R4 Rural Resilience Initiative is a comprehensive risk management approach to help communities be more resilient to climate variability and shocks. ARC Replica is crowding in humanitarian actors into ARC s government led risk management approach. With humanitarian actors matching country policies, international resources are used more cost-effectively while ensuring that country structures and the humanitarian system work together efficiently. The Challenge Fund (CF) supports public and private institutions in developing innovative concepts into tangible insurance products. Global Index Insurance Facility (GIIF) supports the growth of local markets for direct, index-based weather and disaster risk insurance by working together with the public and private sector.

8 Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany Secretariat InsuResilience Friedrich-Ebert-Allee Bonn, Germany T +49 (0) F +49 (0) InsuResilience@giz.de Commissioned by Federal Ministry for Economic Cooperation and Development (BMZ), Special Unit on Climate Addresses of the BMZ offices BMZ Bonn BMZ Berlin Dahlmannstraße 4 Stresemannstraße Bonn, Germany Berlin, Germany T +49 (0) T +49 (0) F +49 (0) F +49 (0) poststelle@bmz.bund.de Supported by the following partners: As of November 2016 Photo credits GIZ / Robert Heine, GIZ / Michael Tsegaye, GIZ /Ursula Meissner Thomas Trutschel /photothek.net Map Index of Risk Preparation across countries Source: Foa 2013 for the World Development Report 2014 Design and layout