Anticipatory Action and Parametric Climate Risk Insurance: Exploring Adaptation Strategies Through Play.
Climate and Disaster Risk Finance and Insurance, Weather Index Insurance, Anticipatory Action Facing the multiplication and intensification of extreme weather events requires anticipatory action (AA) and reliable pre-arranged finance mechanisms. To reflect on this imperative, on June 20th, 2024, UNU-EHS/ MCII held a focus day event on the role parametric climate risk insurance can play within Anticipatory Action in partnership with The Global Shield against Climate Risks and the Anticipation Hub. After the speakers set the stage with an overview of Anticipatory Action and Climate Disaster Risk Finance and Insurance concepts, as well as potential entry points to link both, Ms. Delia Kaiser introduced the work of the Global Shield against Climate Risks and how it carries out its inclusive in-country process to identify the individual solutions needed for countries. She highlighted how local ownership and the involvement of a wide range of public, private, and third-sector stakeholders pave the way for AA. In the second part of the session, different examples and case studies were discussed that link pre-arranged financing, such as insurance, and Anticipatory Action: Mr. Raymond Zingg from IFRC presented IFRC’s AA work, including the Disaster Response Emergency Fund (DREF) Insurance. The DREF is an emergency funding mechanism for all Red Cross and Red Crescent National Societies for disaster response and AA. It uses an innovative insurance mechanism that allows a top-up of the DREF when it runs out of funds. Ms. Sinja Buri (UNU-EHS/MCII) complemented the overview showcasing the novel parametric cyclone insurance product that was developed by UNCDF and UNDRR and which, in addition to a normal parametric cover, allows for advance payouts to agricultural cooperatives based on the forecast of a cyclone to help them and their members to prepare. The pilot was launched in Fiji in 2023 under the Pacific Insurance and Climate Adaptation Program (PICAP). Session participants discussed the definition of Anticipatory Action and specific options and features for insurance product design for Anticipatory Action. Following these exchanges, participants got to experience some of the financial dilemmas faced by climate-vulnerable communities and use financial tools such as contingency loans and weather index insurance through ‘Hotel Resilience,’ a board game developed by MCII and GIZ. _______ This session was organized through the Pacific Insurance and Climate Adaptation Programme (PICAP), which is jointly implemented by the United Nations Capital Development Fund (UNCDF), the UNDP Pacific Office in Fiji, and the United Nations University – Institute for Environment and Human Security (UNU-EHS) aiming to increase the financial preparedness of Pacific islanders to deal with the effects of climate change and natural hazards.
Participants and experts from the insurance and humanitarian sectors, Academia as well as experts working on early warning systems and social protection came together in this session and: – Improved their understanding of Climate and Disaster Risk Finance and Insurance (CDRFI) instruments and Anticipatory Action (AA) protocols. – Discussed how Anticipatory Action can be linked with Risk Financing and where potential entry points for Climate Risk Insurance can be identified. – Learned about existing examples and explored which additional ones may exist. Integrating Anticipatory Action (AA) with parametric insurance can improve traditional reactive approaches to disaster response. This allows for pre-arranged payouts based on forecasts or other triggers, enabling proactive financing for preparedness activities. – Played the board game ‘Hotel Resilience’ in which participants got to put themselves in the shoes of small island decision-makers who had to act and make decisions to improve their islands’ climate resilience using a mix of adaptation measures, financing instruments, and early warning systems. Participants later reflected on the lessons and experiences of the game. With this knowledge, participants are better equipped to develop synergies between Anticipatory and parametric climate risk insurance projects. Input from the discussions is being incorporated into ongoing research on the topic by UNU-EHS/ MCII.
Organized by: United Nations University – Insitute for Environment & Human Security (UNU-EHS)
