Climate Risk Insurance

© GIZ / Harald Franzen

Climate change increases the frequency and intensity of extreme weather events. Climate risk insurance can help to better protect people from climate-related damage and losses - especially when combined with comprehensive risk management strategies.

According to calculations by the World Bank, extreme weather events cause losses amounting to around 300 billion USD each year. People in developing countries and emerging economies are particularly affected by droughts, floods and storms as they often lack sufficient or adequate protective measures. Apart from direct impacts like crop failures or infrastructural damages, climate change threatens to set back individuals, but also whole countries in their development.

Avoiding and dealing with loss and damages is prominently placed in international agendas: the objective is anchored in the Agenda 2030, the Paris Agreement and the Sendai Framework. To reduce the impacts of extreme weather events, it is crucial to implement adaptation measures as well as a well-functioning disaster management system. Adaptation will help to prevent, or at least reduce the extent of damages. However, not all damage can be avoided. In such cases, climate risk insurance can be a solution in the form of financial protection as part of a comprehensive climate risk management.

Climate risk insurance is a relatively new instrument in development cooperation. Nevertheless, GIZ can draw on more than 10 years of experience in this field - be it in agriculture or in the context of disaster management. In addition, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), we provide the secretariat of the Global InsuResilience Partnership, whose goal it is to strengthen the resilience of the poorest and most vulnerable population groups in developing countries against climate risks.

Commissioned by the federal government of Germany and by other partners, GIZ is supporting the implementation of climate risk insurances by a variety of actions, for example:

  • We support the piloting of new insurance models and products and strengthen capacities in the insurance sector to develop sustainable business models.
  • We strengthen awareness of climate risk insurance and the financial competencies of our target groups, e.g. agricultural farmers or municipal administrations, through information campaigns and trainings.
  • We help to create an institutional and legal framework for sustainable market development in the financial and insurance sectors that forms the basis for climate risk insurance.

All these activities are prepared and executed in close cooperation with our local partners, national and international insurance and reinsurance companies, supervisory authorities and international development cooperation institutions.

Examples from Asia and Africa

Since the beginning of 2018, GIZ has been commissioned by the BMZ to support – together with the Allianz Climate Solutions GmbH – cities in Ghana to adapt to and protect against climate risks. In particular, the project aims to improve availability and quality of climate related data, to develop climate risk analyses and climate risk management concepts as well as climate risk insurance products.

Since 2012, GIZ has been commissioned by BMZ and the Swiss Agency for Development and Cooperation (SDC) to implement the project Remote Sensing-Based Information and Insurance for Crops in Emerging Economies (RIICE). This is done in close cooperation with the reinsurance company Swiss Re and representatives of science and technology. The objective of the project is to protect rice-growing regions against extreme weather events. With the help of the European Space Agency's satellite system “Sentinel” information on rice-growing areas in Cambodia, Vietnam, India, Thailand and Indonesia with a total size of around 15 million hectares are collected and analysed. This is used as basis for efficient and transparent insurance programmes.