As the impacts of climate change intensify, vulnerable populations in the Global South continue to face disproportionate risks. From smallholder farmers to informal workers, climate shocks such as floods, droughts, and cyclones are pushing communities further into poverty and undermine their long-term development. While climate risk insurance (CRI) is a promising tool to enhance financial resilience, a significant protection gap persists, particularly at the micro and meso levels, where individuals, small businesses, and communities often lack access to climate risk adaptation instruments. This is where premium support plays a critical role.
Premium support refers to the partial or full subsidy of insurance premiums, which reduces the financial burden on beneficiaries. It not only helps vulnerable households afford insurance coverage but also demonstrates the value of CRI to new customers, insurers, and policymakers alike. By reducing the demand and supply side barriers, premium support encourages uptake, builds trust and helps insurers gain experience and diversify their markets.
Figure: Why Premium Support? (UNU-EHS/ MCII 2025)
A recent publication by the Climate Risk Finance Solutions Team “Climate Risk Insurance: Considerations for Operationalizing Micro- and Meso-level Premium Support,” provides timely insights and highlights the potential of premium support to enhance equity, drive uptake and build resilience in vulnerable communities.
The paper focuses on direct premium support – the allocation of financial resources to help beneficiaries pay for their premiums. To operationalize premium support schemes effectively at the micro- and meso-levels and sustain the impact, several key dimensions must be considered:
- Clarifying the roles and ownership in implementing premium support: Defining the roles of various stakeholders, (including governments, the private sector and the development community) is crucial for effective implementation. National governments play a central role in facilitating premium support, signaling their commitment to protecting the most vulnerable and addressing market inefficiencies, while the private sector contributes expertise and resources.
- Ensuring the sustainability of premium support: Ensuring the long-term viability of premium support schemes requires careful planning. This includes defining clear objectives, establishing multi-year commitments, and developing strategies for a gradual phase-out of support, while demonstrating the value of CRI to ensure a sustainable supply and demand for CRI solutions.
- Reaching the most climate-vulnerable: Effective targeting mechanisms are essential to ensure that premium support benefits the intended beneficiaries. This involves socioeconomic (including considerations of equity, gender and disability), geographic and behavioral targeting strategies, and consideration of data availability.
- Maximizing the transparency of premium support: Transparency in the design, implementation and monitoring of premium support schemes is vital for fostering trust, accountability and learning. This includes clearly communicating objectives, funding sources, eligibility criteria and performance.
Figure: The four key dimensions and their associated considerations for designing and implementing premium support (UNU-EHS/ MCII 2025)
A growing number of actors in the Climate and Disaster Risk Finance and Insurance (CDRFI) community are turning their attention to premium support as a critical tool for expanding access and equity. Recent studies, innovative pilot programs and policy discussions have all contributed to a shared understanding of the importance of affordability, the key implementation challenges, and the evidence still needed to optimize support schemes. Together, these efforts have built significant momentum around the topic.
MCII was instrumental in advocating for the necessity of premium support, championing the cause not only in general discussions but also within international fora like the UNFCCC (2008 and 2012), the G7 and the G20. There is a significant evolution in understanding, especially among donors, who now increasingly recognize that premium support is vital for making CDRFI solutions accessible and scalable. Premium support is no longer just a theoretical concept, but a practical necessity for achieving widespread and equitable access to CDRFI.
The momentum generated must now translate into concrete action. This includes the design and implementation of effective premium support schemes tailored to the specific needs of vulnerable populations, the establishment of sustainable financing mechanisms, and the rigorous monitoring and evaluation of their impact. Looking ahead, MCII remains firmly committed to actively contributing to this next phase by fostering partnerships, sharing knowledge, and advocating for policy changes that will turn the promise of affordable climate risk protection into a reality on the ground.