The Vulnerable 20 Group (V20) Secretariat and Munich Climate Insurance Initiative (MCII) co-organized a strategic dialogue for members of the V20 and the Climate Vulnerable Forum (CVF) together with RIsk Pool CEO’s and Representatives on Building access to Sovereign Climate Risk Pooling for vulnerable countries.

23 June 2022: Sovereign catastrophic risk pools are providing low- and middle-income countries with pre-arranged disaster risk finance, enabling essential public financial liquidity in case of disasters, contributing to financial resilience and reducing the financial protection gap. Despite positive developments, current efforts are not enough to close the protection gap, i.e. uninsured catastrophe losses as a share of total economic losses, which remains 98% in V20 economies. Access to risk pools are still largely out of reach for many V20 countries. Currently, only 44 out of 55 V20 members are eligible for risk pool participation, and only 18 members actually purchased sovereign insurance products in the current policy year. 

Against this backdrop, the workshop co-organized by the V20 Secretariat and MCII facilitated a dialogue between V20 member countries and the risk pool CEO’s and representatives to deliberate on important challenges faced by V20 countries in assessing risk pools, how to reduce barriers and scale-up insurance solutions. The dialogue focused on four key areas (1) development and expansion of sovereign insurance products tailored to the needs of V20 countries (2) ensuring exchanges of best practices on risk layering in V20 countries (3) supporting expansion of disaster insurance markets and sub-national risk pools for micro and meso level (4) joint advocacy for moving forward on the V20 risk pooling agenda and build a fit for purpose international climate disaster risk financing and insurance (CDRFI) architecture. 

The risk pool CEO’s and representatives participating in the workshop included Mr. Isaac Anthony, CEO of the Caribbean Catastrophe Risk Insurance Company (CCRIC-SPF), Mr. Gary Rynsard, Executive Director, Southeast Asian Disaster Risk Insurance Facility (SEADRIF), Mr. Malvern Chirume, Chief Underwriting Officer of the African Risk Capacity (ARC) Ltd. and Mr. Richard Poulter, Technical Advisor of Pacific Catastrophe Risk Insurance Company (PCRIC). 

After a greeting remark of the V20 Presidency of Ghana, highlighting the need to increase affordability and cost-effectiveness of insurance products provided by risk pools. During the first session, Sönke Kreft, Executive Director of MCII presented an overview on the benefits of risk pooling, risk transfer options and general risk pool uptake in V20 countries. In the following workshop session, each risk pool representative introduced their organization and their product offers to the present V20 and CVF members. Following this, a moderated discussion between the Risk Pool Representatives and V20 and CVF members took place under Chatham House Rule.

The discussion focused on various aspects ranging from current activities of sovereign risk pools in different V20 countries, existing challenges and opportunities in creating access to risk pools, affordability and availability of risk insurance products and how to enhance the effectiveness and reach of sovereign risk pooling in V20 countries. Key takeaway from the discussion are as follows:

1. Discussants shared their concern about the immense financial protection gap in many V20 countries and the importance of making pre-arranged finance for disasters available.  With increasing impacts from climate change, economic costs and fiscal pressure are likely to increase substantially in the coming years, putting huge burdens on many small economies of the V20 countries and hurting the livelihood of people and communities.
2. Regarding the role of sovereign risk pools and parametric insurance, it was acknowledged that insurance is one of the many existing financial instruments and there is an urgent need to focus on implementing cost effective disaster risk layering practices in all V20 countries. This will require deeper collaboration between V20 countries, risk pools, international donors and humanitarian organizations. 
3. Participants also emphasized the important role of donor capital and premium and capital support (PCS) to expand country coverage and bring many low income countries into the net of risk pooling. Access to the premium financing facility should be an important priority area to accelerate effectiveness of risk pools in V20 countries. 
4. Product innovation was discussed as an avenue for risk pools to increase access and coverage through needs-based insurance products depending on the country’s risk profile and type of disasters. In this context, risk pools highlighted recent innovations such as collaborating with private sector partners to provide risk insurance coverage to infrastructure and utility companies. It was also highlighted that risk pools are exploring to roll out products on sub-sovereign levels, to reach especially vulnerable households that cannot be covered by existing sovereign solutions. Furthermore, intentions to design multi-year policies that make it easier for vulnerable country governments to plan ahead have been mentioned as well.
5. A conducive political landscape for planning and implementation of disaster risk financing tools including sovereign risk pooling was mentioned as an important challenge in many V20 countries. Increasing awareness on benefits of sovereign risk pooling through steady communication and transparency between risk pools and governments was discussed as means to build trust and increase acceptance on political levels. 
6. Last but not the least, lack of availability of appropriate data and risk modelling in many V20 countries was emphasized as an important challenge to implement risk financing solutions at macro, meso and micro level. The timely improvement of existing data models and indicators to make insurance products more efficient and cost-effective are key points on the agenda of V20 countries and require further follow-ups between risk pools and V20 countries. Towards this end, the V20 countries look forward to the recently launched Global Risk Modelling Alliance (GRMA), to fill gaps in risk data and models and provide technical assistance for vulnerable countries.

After a productive discussion and exchange between V20 and countries and risk pools, the workshop concluded by collecting joint action items for further engagement between V20 members on the risk pool agenda and their expectations towards the InsuResilience Global Partnership as key avenue to advocate the V20 Risk Pooling agenda.