In the past, when there was an extreme weather event, the main questions on people’s minds were: What can be done to ensure a quick response (= respond) as well as a fast recovery (= recover)? Due to the increase in both the frequency and intensity of extreme weather events, the question of what can be done to minimize damage (= prevent) as well as what preparation is needed to keep these weather hazards from becoming a disaster (= prepare) have become increasingly important. Even when these measures are taken, however, some risk remains.
Climate risk insurance, can play a central role in protecting against these residual risks. It holds the potential to incentivize people to start adapting to climate change and develop strategies to reduce their own risk. By being prudent and planning with a long-term perspective in mind, the costs of insurance premiums can go down, thus easing the financial burden on the policyholders.
Innovative insurance solutions, which are integrated into the individual phases of climate risk management (respond, recover, prevent, prepare, and residual risk), help strengthen people’s resilience before an extreme weather event hits. By investing in (re-)construction measures to protect the land and property, a household can keep future damage to a minimum and will enable themselves to recover more quickly after a flood disaster.
ACRIplus is breaking new ground: Together with local authorities and private sector partners, new insurance solutions that are linked to all of the phases of the disaster risk management cycle are being developed. Based on a comprehensive risk analysis of extreme weather events and their direct and indirect effects on people, the environment, and the economy, new measures are also being devised. These are designed to have a positive impact on all of the phases in disaster risk management – an integrated, effective approach which uses the full potential of each phase. Through this approach, we create the opportunity to prepare long-term for climate change and its serious consequences. This project works towards long-term solutions for urban development, industrial zones, renewable energy, and water infrastructure.
The second key focus of ACRIplus is to gather the experiences of different international organizations and channel them to the international dialogue on climate change. Relevant, comparable information is provided in partnership with PreventionWeb, the Global Index Insurance Facility (GIIF), and the UNISDR PreventionWeb platform. The information is freely accessible to everyone. This creates transparency and provides the basis for further analyses and response to key guiding questions. ACRIplus actively brings these experiences to the international climate dialogue by participating in conferences, climate negotiations, and talking to experts from the public, private, and political sectors. READ MORE
New Digital Publication: Integrating Insurance into Climate Risk Management
Alongside project partner GIZ, we have just launched the interactive website that hosts Integrating Insurance into Climate Risk Management. Weather and climate-related extreme events have increased dramatically over the past few decades. In 2015, the international society recognized the need to ensure policy coherence that better understand these risks, anticipate and recover from disaster impacts through innovative financial solutions. While at national level, practical approaches to mainstreaming adaptation and disaster risk measures into the national and sectoral planning proves crucial to enabling sustainable development pathways. As such, the Integrated Climate Risk Management (ICRM) Toolbox is a comprehensive climate risk management approach that strategically combines insurance solutions, with other risk management and adaptation measures. It focuses on unlocking opportunities through insurance solutions when governments aim to prevent disaster impacts, managing residual risks that cannot be prevented, as well as preparing for inevitable disaster, while ensuring efficient response and recovery. Check out the tool HERE
Hotel Resilience: A Game About Risk Prevention, Reduction and Transfer
We have designed a game in the context of ACRI+ to enhance learning and dialogue on the topics of disaster preparedness, prevention, risk reduction and risk transfer with different stakeholders. Check out this instructional video explaining how the game “Hotel Resilience” can be facilitated.
Deutche Welle Feature | Morocco: Insurance against extreme weather
New Video: The Integrated Approach to Disaster Risk Management
First-Ever Climate Risk Insurance Online Database Launched
On the International Day for Disaster Risk Reduction, 13 October 2017, the first-ever online database on climate risk insurance is being launched by the Global Index Insurance Facility (GIIF), the Munich Climate Insurance Initiative (MCII), and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, commissioned by the German Government. The Climate Insurance database shares the experiences of numerous international organizations in the field of risk transfer and insurance solutions in the context of climate risk management and disseminates information on good practices and innovative solutions.
Visit the database HERE
Economics of Climate Adaptation (ECA) – Guidebook for Practitioners
There is a growing consensus that climate change impacts should be considered in the development of adaptation strategies by decision makers at all levels. This requires identifying cost-efficient adaptation measures, resulting from a structured risk management approach. The Economics of Climate Adaptation (ECA) approach offers a unique contribution, which combines risk assessment, adaptation measures and risk transfer. Its results allow a flexible identification of cost-effective climate adaptation measures for a variety of projects and sectors. Recently, KfW decided to implement two pilot studies in Bangladesh and El Salvador using the ECA methodology. The main objectives were to support decision makers in developing their adaptation strategy and to develop a climate adaptation measures investment portfolio. Following the evaluation of these two pilot studies, the need to develop a document for practitioners has arisen. The ECA Guidebook aims at filling this gap while complementing the already existing ECA documentation and tools. This Guidebook is tailored for practitioners of developing projects, which promote resilience in developing countries. It aims also at 1) exploring whether ECA methodology is appropriate to the project’s goals and 2) offering step-by-step guidance while using the ECA methodology. DOWNLOAD HERE
Latest Project News
Lusaka, Zambia:On 5 November, MCII together with ILO Impact Insurance Facility and GIZ organised a pre-workshop on the auspices of the 14th International Microinsurance Conference to share good practices and spur promising ideas to help advance the application of Climate Risk Insurance in different sectors.
Session 1 – Welcome and Overview
Topics for discussion:
- Integrated climate risk management
- Importance of climate risk management for better adaptation and improved resilience
- Interactive Gaming Exercise
Session 2 – Sources of Finance and Partnerships
The session intends to outline possible pathways of acquiring the right kind of funding for different applications of CRI
Topics for discussion:
- Public-Private partnerships: models for scaling? (Antonis Malagardis, GIZ)
- Raising funds from private sources – social impact investors and bonds (Emily Coleman, IFAD)
- Experience sharing and idea generation (all participants share their experiences)
Session 3 -Innovations in insurance and matching it to the consumers’ needs: Bundling, aggregation
Topics for discussion:
- Lessons from contract farming (Saskia Kuhn, GIZ)
- Bundling of insurance products with financial and non-financial services (Pranav Prashad, ILO)
Session 4 – Opportunities and barriers for ICR in different sectors
Topics for discussion:
- MSMEs (Abderrahman Amor, Regional government in Agadir, Morocco)
- Urban Development (Weihua Fang, Academy of Disaster Reduction and Emergency Response, Beijing Normal University)
- Renewable Energy (Eike Behre, GIZ)
- Agricultural Sector (Ahmed Gibrilla, Ministry of Food and Agriculture, Ghana)
Session 5 – Interactive tools
- Economics of Climate Adaptation, ECA (Maxime Souvignet, MCII)
- DRM Toolbox (Daniel Asare-Kyei, Esoko)
- Awareness Raising through Volunteers (Jennifer Phillips, MCII)
- Experience sharing and idea generation (all participants share their experiences)
Southwestern Morocco has a huge industrial park with more than 400 small and medium sized enterprises. 25,000 people are working in agriculture. Most process and export citrus, fish or the famous Argan oil. 90 percent of Morocco’s agricultural exports come from Souss-Massa, but many businesses here are struggling with the effects of climate change. An Integrated Climate Risk Management approach including insurance against damages through extreme weather may bring support.
See the original post HERE
“New ways for climate insurance”: how we can quantify the cost and benefits of risk transfer measures to facilitate decision making.
Interview with Dr. Maxime Souvignet (ACRI+ Project Manager)
Question 1: Why do we need decision making support tools for risk transfer? How does it link to MCII’s agenda of advancing insurance linked approaches for communities impacted by climate change?
MS: There is a growing consensus that climate change impacts should be considered in the development of adaptation strategies by decision makers at all levels. We see this outlined in the big global policy dialogues including the Paris Agreement, the SDGs and the Sendai Framework on Disaster Risk Reduction. This requires identifying cost-efficient adaptation measures, including risk transfer, resulting from a structured risk management approach.
However, there are many limitations on how these measures are accepted by decision makers and stakeholders. Quantifying the benefits of adaptation measures, or risk transfer is key. For the particular case of risk transfer, it is often critical to decision makers and stakeholders to know what might be the specific premium and payoffs for a particular climate insurance product. And it is critical to compare the benefits of insurance with other adaptation measures in order to make documented decisions.
In the context of our work at MCII, we realise that to date there is no quantitative tool providing the “cost” and “benefit” of implementing a risk transfer product. This is especially needed when advocating for a “smart mix approach”. By smart mix approach I mean combining adaptation measures and risk transfer in order to maximize resilience. It helps us showcase the benefits of climate insurance, especially towards advancing climate insurance for vulnerable populations.
The Economics of Climate Change Adaptation (ECA) is unique in the sense that it offers a flexible quantification of cost-effective climate adaptation measures for a variety of projects and sectors. In the context of international financial and technical cooperation, specific adaptation measures combined with risk transfer are ensuring investments that are more sustainable, while promoting assets and economic activities that are more resilient to the impacts and consequences of current and projected future climatic conditions. This tool can also provide orientation for governments and initiatives when considering how to best protect especially the poor and vulnerable people from different climatic hazards.
Question 2: You have extensive experience with the ECA methodology: Could you quickly talk us through the process of applying ECA? What are the advantages?
MS: The ECA approach has been developed by SwissRe and ETH Zurich. UNU-EHS has also produced a step-by-step guidebook on how to apply it in real conditions (available here) – it bridges a gap between traditional cost benefit analysis, vulnerability assessment and impact assessment. ECA fully integrates all three. It allows therefore the flexible identification of cost-effective adaptation measures for a variety of projects and sectors. It addresses following questions such as:
First: What is the potential climate-related damage over the coming decades?
Second: How much of that damage can be averted, using what type of adaptation measures?
Third: What investments will be required to fund these measures, and will the benefits of these investment outweigh the costs?
The advantages are several:
- ECA offers a systematic and transparent approach that fosters trust and initiates in-depth inter-sectoral stakeholder discussions.
- The methodology can also be flexibly applied from the national down to local level to different sectors and different hazards.
- It provides key information for programme-based approaches, insurance approaches and has potential to support National Adaption Plans’ (NAPs) development.
- Last but not least, it is open source and has been used in different developing countries with a focus on vulnerable populations.
Question 3: Could you please introduce us to the ACRI+ project? Which role does ECA play in the project?
A collaboration between GIZ and MCII, ACRI+ (Advancing Climate Risk Insurance Plus) is developing integrated solutions for climate risk management (ICRM). The goal is to enable people and their governments to better deal with the consequences of climate change. ACRI+ even goes one step further – that is the plus in the acronym – by planning for residual risk as a separate step in the climate risk management approach. The project is focusing on four different sectors (agriculture, urban areas, renewable energies and SMEs) in four different countries, where the ICRM approach is currently developed and tested.
The ACRI+ approach strives to explore new ways of how to apply climate insurance: Together with local authorities and private sector partners, insurance solutions that are linked to all of the phases of the disaster risk management cycle should be developed. Using the ICRM approach, we create the opportunity to prepare long-term for climate change and its serious consequences.
The second key focus of ACRI+ is to gather the experiences of different international organizations in the application of climate risk insurance and strategic climate risk planning and channel them to the international dialogues on climate change. This is one of our main roles at COP 23.
The ECA approach plays a key role in three of the 5 (five) phases of the ICRM disaster management cycle. The approach, in combination with its integrated tool climada (additional information available here) offers a comprehensive risk analysis of extreme weather events and their direct and indirect effects on people, the environment, and the economy. A ranking of measures including risk transfer can also inform about the benefits of solutions such as build-back-better.
Question 4: What developments do you see in the field of decision making support instruments for climate risk management?
There is already a plethora of decision support system designed, which are not necessarily resulting in better decisions, or in decisions that are not applied or implemented. In my opinion, it is because these tools do not fully integrate concepts relevant for climate risk management, and because most of these tools offer only a technical solution. The upcoming challenges are how to allocate investments for climate risk management and how to embed these decisions in the political process.
In terms of risk transfer, there is a need to quantify the benefits of a particular product. It would certainly raise the acceptance of climate insurance if beneficiaries could place a dollar value on it and compare it to other options.
There is also the question of uncertainty. Few decision making tools address it explicitly. In the context of climate change, and socio-economic scenarios, it is crucial to include the concept of uncertainty in the decisions we make. However, in my opinion, uncertainties remain extremely difficult to communicate, because they convey the message that decisions are based on poor bases. Nevertheless, more effort should be made in this direction.
On behalf of the Advancing Climate Risk Insurance Plus team (ACRI+), the Munich Climate Insurance Initiative (MCII) and the GIZ (German international Cooperation), has launched its activities in Morocco with its Kick-Off Workshop:
“Strengthening Resilience for SMEs in Industrial Zones in Morocco”.
With droughts and flooding continuing to threaten small and median sized businesses in Morocco, it is time to take a proactive role in helping firms overcome these challenges brought about by climate change.
The ACRI+ team is currently working with numerous stakeholders to develop a strategic framework for implementing climate risk insurance solutions in Morocco using an integrated approach. This kick-off meeting brought together participants from different sectors to discuss the hazards that firms are facing today and brainstorm solutions.
The workshop aimed at achieving the following outcomes:
- To present the objectives and methodology of the project concept;
- To increase the ownership of stakeholders, and
- To present the possible benefits of climate insurance for SMEs.
This event comes in line with the recent SIA Conference 2017 in Rabat (Sustainable Industrial Areas), where MCII and GIZ jointly presented the potential and limits of climate insurance for industrial zones as part of a panel discussion. The panel included internal experts involved in increasing resilience of industrial zones and the population who depend on them for their livelihoods.
You can find Maxime’s presentation at the SIA conference, HERE
A Toolbox for Weather Risk Insurance will be developed to better equip governments and other stakeholders in managing climate risks with the help of insurance. In order to do so, different phases of the Disaster Management Cycle (prevention, preparedness, response and recovery) were examined from an insurance perspective. The goal of this workshop was to share the approach with international experts, to identify areas for the development of a Toolbox and for testing in the agricultural sector in three developing countries. See HERE the Agenda of the Workshop.
The panel discussion brought together policy-makers, German parliamentarians, academics, and business partners to discuss the challenges and opportunities that exist in risk transfer solutions like insurance. See highlights of the panel discussion in the video below
In the week of 21 – 24 March 2017, the fifth meeting of the Executive Committee of the Warsaw International Mechanism (WIM) took place in Bonn. With the establishment of the WIM for Loss and Damage, UNFCCC is addressing the risk of loss and damage associated with the negative impacts of climate change and the need for comprehensive climate risk management and resilience-building. The meeting emphasized the role of comprehensive climate risk management approaches and decided to establish a clearing house for risk transfer that serves as a repository for information on insurance and risk transfer. This tool, when established, will serve as a pool with guidelines based on good practices on climate risk insurance strategies.Read More
There is a growing consensus that climate change impacts should be considered in the development of adaptation strategies by decision makers at all levels. This requires identifying cost-efficient adaptation measures, resulting from a structured risk management approach. The Economics of Climate Adaptation (ECA) approach offers a unique contribution, which combines risk assessment, adaptation measures and risk transfer. Its results allow a flexible identification of cost-effective climate adaptation measures for a variety of projects and sectors. Recently, KfW decided to implement two pilot studies in Bangladesh and El Salvador using the ECA methodology. The main objectives were to support decision makers in developing their adaptation strategy and to develop a climate adaptation measures investment portfolio. Following the evaluation of these two pilot studies, the need to develop a document for practitioners has arisen. The ECA Guidebook aims at filling this gap while complementing the already existing ECA documentation and tools. This Guidebook is tailored for practitioners of developing projects, which promote resilience in developing countries. It aims also at 1) exploring whether ECA methodology is appropriate to the project’s goals and 2) offering step-by-step guidance while using the ECA methodology.