As the US joins the InsuResilience Global Partnership, high level HLCG Meeting starts the first international dialogue on premium support
June 11, 2021: While many of the low- and lower middle-income countries, including the V20 membership, are still struggling to cope with the negative impacts of the Covid-19 pandemic, in a time where global temperatures are accelerating toward 1.5 degrees Celsius of warming, members of the governing body of the InsuResilience Global Partnership, the High-Level Consultative Group (HLCG) came together in their fourth meeting on June 1, 2021 to discuss the Partnership’s efforts to enhance the affordability of pre-arranged disaster risk finance, specifically insurance.
Recognizing that the lack of affordability is a major driver of low insurance uptake, the HLCG focused on the critical need of enhancing the affordability of insurance instruments through premium and capital support not only for improving vulnerable countries’ access to global risk carriers, but for building sustainable markets that can benefit from public-private partnerships. After insightful discussions, the meeting concluded by tasking the InsuResilience Secretariat with developing a Policy Note capturing members’ needs and priorities. The 5th HLCG Meeting, prospectively taking place in October 2021, will focus on reviewing this note and work towards a decision that enhances global coordination, transparency and cost-effectiveness of premium support. For the first time the issue of premium support – and with that the affordability challenge that climate change brings to risk insurance and risk finance – is discussed openly and systematically at the international level. This is a big win for the V20 group, which for a long time highlighted the need for systematic climate and disaster risk finance.
The deliberations were underpinned by the idea that the pandemic has clearly put forward just how important disaster preparedness and access to pre-arranged and predictable finance for countries really is. This is true specially for the V20 members where the debt risks have increased due to the pandemic spending. The current crisis brought about more use of post-disaster financing highlighting that vulnerable countries are underprepared for disasters, with the pandemic also having exacerbated debt risks in many low- and lower middle-income countries.
Yet, unlike many other developed countries, the majority of V20 members has faced climate disasters such as typhoons, hurricanes, heavy rain, or sudden drought at the same time. For example, as of September 2020, around 52 million people globally, most of them from lower or lower-middle income countries, have been directly affected by an overlap of floods, droughts, or storms and the pandemic. The increasing risks from both impacts of climate change and the pandemic highlights the changing nature of societal risks and why risk reduction solutions through insurance instruments are essential to build resilience to multiple shocks through greater ex-ante investment in preparedness.
However, disaster risk finance solutions and insurance markets in many low and lower middle-income countries, including the V20 membership, are largely underdeveloped or are not affordable resulting in high financial protection gaps.
Going forward, the Partnership will thus address the need of capital and premium support to accelerate the access to disaster risk finance among the low income and vulnerable population segments. Towards this, the HLCG decided work for more global coordination, transparency, and cost-effectiveness of premium support for risk transfer solutions.
To further strengthen the commitment towards providing support to V20 countries, Germany’s State Secretary Ms Flachsbarth, the G20 Co-Chair of the HLCG, also announced the support of Germany towards the V20’s Sustainable Insurance Facility (SIF) starting this year to which will enable V20 countries to enhance implementation action by developing and implementing tailor-made project proposals to better protect (Micro, Small & Medium Enterprises) MSMEs against extreme weather events.
Recognizing that one of the cornerstones of the Partnership’s work plan, the InsuResilience Vision 2025, has been to develop and mainstream a Monitoring and Evaluation (M&E) framework in support of tracking progress towards the Partnership’s ambitious targets, the HLCG, over the coming weeks will also review the indicators, targets, and methodologies developed so far. The objective is for HLCG members to affirm the reviewed Vision 2025 targets, based on the understanding that the M&E framework is no static framework, and provided further amendments as expressed by HLCG members will be considered.
Shortly after the HLCG Meeting, the US furthermore announced having joined InsuResilience, with first formal engagement planned for the upcoming 5th HLCG Meeting towards the end of this year.
With Covid-19 already causing high economic and social damage on the V20 countries’ finances, building financial resilience through climate and disaster risk finance and insurance solutions is critical and the need for pre-arranged finance for countries has never been more urgent. Now, as the US is back at the table and countries such as the Philippines and Bangladesh have joined the Partnership only by the end of last year, the expectations placed onto the InsuResilience Global Partnership are high.