With USD 252 billion of reported economic damage caused by natural disasters, 2021 became the fourth most damaging year recorded over the last two decades (CRED, 2021). Hurricane Ida alone caused USD 65 billion in damages and ranks as the 6th most damaging natural disaster of the last 20 years. The recently published IPCC Sixth Assessment Report Climate Change 2022: Impacts, Adaptation and Vulnerability (IPCC, 2022a) warns urgently that the risks of climate change continue to increase, but that despite growing knowledge of impact chains, we are making little progress in climate adaptation and risk management. If the widening protection gap is not narrowed down soon, we will soon run up against the hard limits of human and ecosystem adaptation in many areas. This discussion paper highlights opportunities in 2022 in the various policy forums of international climate, development, and humanitarian policy, to narrow the protection gap through Climate and Disaster Risk Finance and Insurance (CDRFI). The paper offers an overall view of the discourse landscape and is aimed primarily at those political and civil society actors who have so far been familiar with only parts of the debate (e.g. the negotiations on loss and damage in the United Nations Framework Convention on Climate Change (UNFCCC) process) and are interested in identifying possible synergies with other parts.

One development over the past years has been the formulation of “governance principles” to influence institutional arrangements for disaster risk finance and the implementation practice by major initiative like the InsuResilience Global Partnership. MCII has published an overview about the governance principles in the space of climate and disaster finance and insurance. The assessment shows emerging principles on the political, institutional, policy, product and impacts. It includes recent policy decisions by the InsuResilience Global Partnerships’ (IGP) High Level Consultative Group including the IGP Pro Poor Principles[KS1] , and the IGP Principle on SMART Premium and Capital Support[KS2] The publication is a contribution to the UNFCCC Expert Group on Comprehensive Risk Management, where MCII’s Executive Director Sönke Kreft serves as a member. The document serves as an official activity of the Plan of Action, and should inform guidance for better climate risk management developed at the climate summit at the end of year.  

Climate impacts are increasing and will affect especially those people, communities and countries that are already most vulnerable but have contributed least to the climate crisis. At the same time, the international Climate and Disaster Risk Finance (and Insurance) (CDRFI) architecture is not prepared to adequately provide them with financial protection. Major problems include: a lack of financing at scale to meet real needs; insufficient coverage of relevant risks and impacts; lack of comprehensive risk financing strategies and limitation to a narrow scope of instruments and an increasingly fragmented and complex CDRFI architecture. Against this problem statement the Group of Seven (G-7) needs to deliver the following:

1. Provide new and additional funding to support developing countries in managing climate risks and addressing loss and damage,
2. Expand the CDRFI architecture to a system of global protection in order to provide coverage for all relevant climate risks and impacts; acknowledge the SMART Premium and Capital Support Principles,
3. Reform the InsuResilience Programme Alliance to advance a strategic disaster finance approach,
4. Develop and implement needs-based solutions jointly with vulnerable countries.

In the run-up to the G-7  Development Minister meeting in Berlin 18-19th May and the G-7 Heads of State Summit 26 - 28th June in Elmau, MCII and Germanwatch published joint key asks for a successful G-7 outcome.