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The insurance sector and a group of nations most vulnerable to
climate change jointly launched an initiative on the sidelines of
the COP26 meeting to model and assess climate risks faced at the
local and country level.
Countries such as Bangladesh and Pacific island nations that are
most vulnerable to climate-fueled sea level rise and other weather
impacts have to determine where they are most vulnerable.
For that task, these countries need climate data at the local
and national level.
The Insurance Development Forum (IDF) and the Vulnerable 20
Group of Ministers of Finance for climate-vulnerable countries
(V20) signed an agreement 3 November to set up a public-private
partnership known as Global Risk Modeling Alliance (GRMA) to
provide analytics capability where it is needed the most.
Complementing this effort will be the development of the Global
Resilience Index Initiative (GRII), which will provide a globally
consistent model to assess resilience across sectors and
geographies.
Greater access to climate risk data
The idea behind the alliance and the index initiatives is to
enable countries to take ownership of their own risk analysis by
leveraging established insurance-based methodologies, tools, and
experience.
"As an industry, we have consistently recognized that climate
change is the biggest challenge of our time. A fundamental pillar
of addressing it will be greater access to climate risk
information, tools, and standards, as well as benchmark metrics
that will shed light on the climate risks of today and on future
impacts," AXA Group and IDF Chairman Denis Duverne said in a
statement.
The IDF is in a position to help because it is a public-private
partnership led by the global insurance sector and supported by the
UN and other international organizations. Its goal is to extend the
use of insurance and its related risk management capabilities to
build greater resilience and protection for people, communities,
businesses, and public institutions that are vulnerable to
disasters and their associated economic shock.
Risk analysis remains the foundation for "mainstreaming" climate
and disaster risk finance, the panelists said.
Answering tough questions
Underscoring the importance of risk data models and analytics in
building climate resilience, Amal Mandal, joint secretary for the
Bangladeshi Ministry of Finance's economic relations division, said
vulnerable nations need climate data at the local and national
level to be able to answer these most difficult of questions and to
"climate proof" their economies.
"What lands do we preserve and what might be consigned to
oblivion with the rising tide" as vulnerable nations prepare their
climate resiliency plans, asked Mandal at a 9 November session on
the collaborative solutions needed to build up a resilient
world.
"What happens when our people are pushed against their will to
stave off the irreversible wave?" and "How do we maintain our
financial and economic resources?" he added.
The half-day session was chaired by the V20 Presidency, which
Bangladesh currently holds, and convened by the IDF, and the UN
Environment Programme Finance Initiative (UNEP FI) Principles of
Sustainable Insurance.
On hand to discuss the significance of the risk modeling
initiative was IDF Secretary General Ekhosuehi Iyahen, who said
understanding country-specific risk is not only important for
tailoring solutions for climate impacts, but also to drive "greater
traction" around conversations on climate adaptation and
finance.
Identifying and financing climate adaptation projects remains a
challenge both for the developed countries that would fund them as
well as the developing countries that would be the beneficiaries.
The
plan to disburse the $100 billion a year in climate financing,
which the UK COP26 Presidency released 8 November, doesn't make it
clear what procedures would be followed for identifying projects in
countries that are most in need.
The alliance's work, however, will allow vulnerable countries to
develop their own analysis to inform local decisions, rather than
have someone externally do the work who is not familiar with local
conditions, she said.
Assisting micro, small, and medium businesses
During that session, the IDF, V20, and UNEP FI also launched the
Sustainable Insurance Facility (SIF), which is charged with
developing and promoting the adoption of climate-smart insurance
solutions by micro, small, and medium-sized businesses.
As explained by Marshall Islands Climate Envoy Kathy
Jentnil-Kijiner, SIF will consist of bundled insurance products
designed to enhance climate value at affordable levels, aiming
ultimately to bolster the ability of these enterprises to embrace
climate-friendly solutions.
These products will both protect these businesses from potential
damages associated with climate impacts as well as enabling a
low-carbon transition through guaranteeing energy savings, which
can be accomplished through investing in rooftop solar or energy
efficiency measures.
In the event of weather-related hazards or shocks, decentralized
energy systems can be resilient for the community as a whole, V20
Senior Advisor Sara Jane Ahmed said.
When faced with the issue of a high upfront cost of capital and
high interest rates, Ahmed said, insurance can de-risk financing.
This reduces the cost of capital and thus makes decentralized
energy systems more viable.
In East African countries like Kenya, Uganda, and Tanzania, an
initiative like SIF would be most welcome as people's incomes are
low and insurance penetration below 3%, said Caesar Mwangi, CEO of
Kenya-based ICEA LION Insurance Holdings.
Posted 09 November 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst
