Following brainstorming discussions in Cornwall, United Kingdom (UK) at the weekend, leaders of the G7 (Group of Seven) economies made a range of commitments to expand climate and disaster risk insurance, amongst other climate financing pledges.
The decisions of the G7 countries’ leaders during their meetings at Carbis Bay, Cornwall is seen by industry analysts as one of the key points on the road towards the 26th UN Climate Change Conference of the Parties, or COP26, later this year given the fact that climate risk and resilience has remained hottest topics for global leaders over the past months.
Following the G7 Summit, the United States has also made a range of specific commitments to the global insurance and reinsurance industry, including its joining the InsuResilience Global Partnership.
In a statement on the US government’s commitment, the U.S. Agency for International Development (USAID) announced: “To reach the partnership’s goal of protecting 500 million poor and vulnerable people against climate shocks by 2025, USAID will help partner governments improve their ability to avert and minimize damage to those most at risk. Through these investments in relief before disasters happen, USAID is empowering governments to respond swiftly to emergencies and support people who lose their livelihoods,”
The agency explained that it was important to “empower governments and communities to proactively manage risk before disasters strike, these partnerships help countries protect critical development gains.”
In addition, the US has announced a second initiative after joining the G7 Summit, namely the Risk-Informed Early Action Partnership, a collaboration to build and enhance early warning systems so that climate-vulnerable countries can take early actions to protect lives and livelihoods.
The USAID announced it would become a Co-Chair of the Global Facility for Disaster Reduction and Recovery (GFDRR), a World Bank initiative that helps developing countries understand their risks and reduce their vulnerability to natural hazards and climate change.
The GFDRR also supports the World Bank work, including the use of insurance, as well as reinsurance capital and instruments such as catastrophe bonds.
It clarified: “USAID is a longtime supporter of the GFDRR, and since 2010, has been a member of the Partnership Council, the Facility’s primary decision-making, oversight, and advisory body. The chair and co-chair of the Partnership Council provide strategic direction to help countries recover from disasters quickly and integrate disaster risk management and climate change adaptation into development strategies and investment programs.”
The US government further indicated in a post-G7 summit statement that additional commitments being made by the G7 economies would include “more finance contributing to adaptation and resilience, disaster risk and insurance, as well as support for nature and nature-based solutions.
“We also encourage further development of disaster risk finance markets. Towards this, G7 members have committed hundreds of millions worth of new financing for early action, disaster risk and insurance in line with the InsuResilience Global Partnership and Risk-Informed Early Action Partnership (REAP). We commit to establishing the necessary market infrastructure for private finance to support and incentivise the net zero transition.”
The White House also committed to research and a science led approach, assuring that, “we will explore how existing and potential new mechanisms and initiatives can support risk reduction, prevention and response to future systemic crises, natural disasters and pace of technological change.”
Other countries are also stepping up efforts in these areas, with the United Kingdom committing £120 million in new funding and Germany €125 million, to “enable quicker responses for vulnerable people when extreme weather and climate-linked disasters hit.”
For instance, the UK Government explained that “pre-arranged financing for vulnerable communities will help build the systems needed to reach the poorest people quickly, such as payments when harvest fail.
“This will protect those most at risk and help reduce losses and damage to communities, infrastructure and livelihoods caused by climate change.
“The UK and Germany will also use this money to invest in the regional disaster protection schemes across Africa, South East Asia, the Caribbean and Pacific to protect the lives and livelihoods of poor and vulnerable people against climate risks. This support contributes to the InsuResilience Global Partnership’s Vision 2025 and the Risk Informed Early Action Partnership (REAP) – two key global coalitions working to reduce the impact of disasters.
“This joint action represents substantial new support for countries on the frontline of climate change and humanitarian disasters”, the UK Government added.
In his remarks, the UK Foreign and Development Secretary, Dominic Raab, said: “Tackling climate change is one of the greatest threats of our time as without action, it could push more than 100 million people below the poverty line as soon as 2030.This joint UK, US and German action will enable quicker responses to extreme weather and climate-linked disasters in countries bearing the brunt of climate change.”
Similarly, the German Development Minister, Gerd Müller explained: “Climate change is a reality – and we must not lose sight of this fact even in these times of the COVID-19 pandemic. It is important that the UK G7 Presidency has made climate action a focus of the summit.
“As those most responsible for causing climate change, we must assume responsibility for its consequences. Droughts in Africa, floods in Asia – for the poorest, these climate disasters often mean the loss of their livelihoods. But less than 5% of the damage in these countries is covered by insurance. Through our new commitments, we are taking an important step towards insuring, by 2025, 500 million people in developing countries against damage caused by climate change.
“This means that emergency programmes can provide quick and targeted assistance to those affected when a disaster strikes”, the minister stressed.
The G7 countries maintained that these new commitments to support the roll-out of disaster and climate risk insurance were aimed at protecting lives and tackling loss and damage caused by climate change globally.