The G7 Summit on 7-8 June 2015 in Schloss Elmau has dealt prominently with climate change and development issues. The German G7 Presidency achieved an unprecedented level of commitment to climate change insurance as adaptation tool, thus powerfully promoting resilience. The leaders of the G7 states jointly declared:
“We will aim to increase by up to 400 million the number of people in the most vulnerable developing countries who have access to direct or indirect insurance coverage against the negative impact of climate change related hazards by 2020 and support the development of early warning systems in the most vulnerable countries.”

Insurance helps to better cope with the consequences of climate change. Both the UN Framework Convention on Climate Change (1992) and the Kyoto Protocol (1997) refer to it as one of the three ways to support adaptation in developing countries, along with providing funding and technology transfer.

Insurance companies have been suggesting for years that climate change should be considered in political and corporate planning. They are among the actors who observe climate change impacts on natural disaster trends most closely. The Global Insurance Industry Group, founded by ClimateWise, Munich Climate Insurance Initiative (MCII), and the UNEP Finance Initiative, maintained in the run-up to the COP19 in Warsaw that: “Increased risks resulting from climate change and ecological degradation pose a shared risk to the insurance industry, governments and society.”

The German government also has been working actively on the topic. The MCII received support from the International Climate Initiative of the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) for the project Climate Risk Adaptation and Insurance in the Caribbean, implemented together with Caribbean Catastrophe Risk Insurance Facility (CCRIF), MicroEnsure and Munich Re.

The Federal Ministry for Economic Cooperation and Development (BMZ) contributed EUR 50 million to help establish and develop the ARC Insurance Company Ltd., which insures against drought risks in Kenya, Mauritania, Mozambique, Niger, and Senegal. Expansion to up to 20 African countries is planned. During the high-level conference on “Reducing risks, insuring losses, increasing resilience” held on 6 May 2015 in Berlin, Minister Gerd Müller (BMZ) announced that Germany would spend EUR 150 million to achieve the 400 million goal.

States, organisations and households can profit from insurance products. The CCRIF, for instance, allows Caribbean states to pool the risks caused by their exposure to extreme weather events. Index-based insurance, as offered by MCII or CCRIF, makes payments when certain weather indicators are red and before actual damage is caused. Importantly, the activities to improve risk analysis and preventive measures to reduce risks are accompanying elements of insurance projects. Incentives to adopt adaptation measures can be integrated into an insurance scheme.

However, the scaling-up of pilot projects is demanding. To gather appropriate data, establish an effective regulatory framework and build trust among potential customers are all challenging tasks. Also, the sustainability question remains. Will insurance schemes persist when initial donor funding runs out and climate-related damage increases? And what does it take to offer an adequate solution to the uneven risk distribution around the world?

Experts furthermore reiterate that loss and damage as well as building resilience remain important issues for vulnerable countries, and climate insurance alone cannot be a sufficient response to this. The developing world and its advocates still expect an unequivocal and transparent outline of how the Copenhagen commitment of developed countries to mobilise annual climate finance of USD 100 billion by 2020 will be met.