Climate Risk Insurance and Risk Financing in the Context of Climate Justice A Manual for Development and Humanitarian Aid Practitioners Imprint Published by Written by: Thomas Hirsch (Lead author), Climate and Development Advice Vera Hampel (Climate and Development Advice) Edited by: Rebekah Chevalier Designed by: Saskia Rowley Acknowledgement: This Toolkit is a product of the ACT Alliance Global Climate Change Project, implemented with the support of ACT member Brot für die Welt. 2020 cover photo: alpha kapola/nca R E P O R T Climate Risk Insurance and Risk Financing in the Context of Climate Justice A Manual for Development and Humanitarian Aid Practitioners List of figures ...........................................................................................1 List of abbreviations ............................................................................1 Glossary 3 Executive summary .............................................................................5 Contents Introduction ............................................................................................8 How to use this manual ....................................................................9 WHAT YOU NEED TO KNOW ABOUT CLIMATE RISKS 10 List of figures ......................................................................................................................................................................................................................1 COMPREHENSIVE CLIMATE RISK MANAGEMENT ...... 15 List of abbreviations .......................................................................................................................................................................................................1 15 Glossary 3 Executive summary ........................................................................................................................................................................................................5 JUSTICE, HUMAN RIGHTS, AND PRO-POOR PRINCIPLES TO GUIDE Introduction .......................................................................................................................................................................................................................8 CLIMATE RISK INSURANCE AND FINANCING 1 8 How to use this manual ...............................................................................................................................................................................................9 CLIMATE RISK INSURANCE ......................................................21 WHAT YOU NEED TO KNOW ABOUT CLIMATE RISKS ........................................................................................................................... 10 The role of climate risk insurance in redressing loss and damage 21 COMPREHENSIVE CLIMATE RISK MANAGEMENT ................................................................................................................................. 15 Types of climate risk insurance ..............................22 Parametric or index-based climate risk insurance 22 JUSTICE, HUMAN RIGHTS, AND PRO-POOR PRINCIPLES TO GUIDE Indemnity-based climate risk insurance ...........23 CLIMATE RISK INSURANCE AND FINANCING ...................................................................................................................... 18 Micro- and meso-level insurance ..........................23 CLIMATE RISK INSURANCE .................................................................................................................................................................................21 Macro-level insurance ................................................23 The role of climate risk insurance in redressing loss and damage ...............................................................................................21 Examples of climate risk insurance at micro or meso levels 24 Africa ...................................................................................24 Types of climate risk insurance .........................................................................................................................................................22 Asia-Pacific .......................................................................28 Parametric or index-based climate risk insurance ..................................................................................................................22 Latin America and the Caribbean .........................34 Indemnity-based climate risk insurance ......................................................................................................................................23 MENA region ...................................................................38 Micro- and meso-level insurance .....................................................................................................................................................23 Regional climate risk insurance pools .............................39 Macro-level insurance ...........................................................................................................................................................................23 African Risk Capacity (ARC) ................................... 41 Examples of climate risk insurance at micro or meso levels ..........................................................................................................24 Caribbean Climate Risk Insurance Facility (CCRIF SPC) 44 Africa ..............................................................................................................................................................................................................24 Pacific Climate Risk Assessment and Financing Initiative (PCRAFI) 46 Asia-Pacific ..................................................................................................................................................................................................28 Southeast Asia Disaster Risk Insurance Facility (SEADRIF) 47 Latin America and the Caribbean ....................................................................................................................................................34 InsuResilience Global Partnership and other support initiatives 48 MENA region ..............................................................................................................................................................................................38 CLIMATE RISK FINANCING ........................................................52 Regional climate risk insurance pools ........................................................................................................................................................39 The role of climate risk financing to redress loss and damage 52 African Risk Capacity (ARC) .............................................................................................................................................................. 41 Types of climate risk financing instruments ..................53 Caribbean Climate Risk Insurance Facility (CCRIF SPC) ....................................................................................................44 Examples of climate risk financing instruments .........54 Pacific Climate Risk Assessment and Financing Initiative (PCRAFI) ............................................................................46 National risk financing instruments .....................54 Southeast Asia Disaster Risk Insurance Facility (SEADRIF) ..............................................................................................47 International climate risk financing instruments 5 5 InsuResilience Global Partnership and other support initiatives .....................................................................................48 Risk transfer to third parties .....................................56 CLIMATE RISK FINANCING ...................................................................................................................................................................................52 CLIMATE RISK TRANSFER AT THE COMMUNITY LEVEL 57 The role of climate risk financing to redress loss and damage .......................................................................................................52 CONCLUSION .....................................................................................63 Types of climate risk financing instruments .............................................................................................................................................53 BIBLIOGRAPHY .................................................................................64 Examples of climate risk financing instruments ....................................................................................................................................54 National risk financing instruments ................................................................................................................................................54 International climate risk financing instruments ......................................................................................................................55 Risk transfer to third parties ................................................................................................................................................................56 CLIMATE RISK TRANSFER AT THE COMMUNITY LEVEL.....................................................................................................................57