To date, climate change contributes to an increasing frequency and intensity of disasters that have soared to unprecedented levels. Developing countries are the hardest hit by those risks and face the particular challenge of financial constraints that strongly impact the livelihoods of the poor and vulnerable, impeding the ability to respond and recover from extreme weather events. Many developing nations lack the financial capacity to effectively respond to climate-induced disasters, which hinders food security and long-term economic development. Climate-sensitive sectors, such as agriculture, are especially affected by extreme weather events. Therefore, the promotion of integrated mechanisms for climate risk management and transfer, such as insurance, are essential in building resilience.
Patricia Espinosa (Executive Secretary of the United Nations Climate Change) emphasizes that improving “access to adaptation finance and affordable climate risk and disaster insurance” is essential in responding to the climate change challenge. Climate risk insurance can act as a viable risk transfer instrument to cushion people against the adverse impacts of climate-induced disasters. It provides poor and vulnerable communities with access to alternative coping strategies by enhancing financial inclusion and by empowering them to better cope with the risks of climate change.
The complexity of climate risk transfer in the agricultural sector underlines the necessity of an integrated climate and disaster risk management strategy that incorporates both ex ante financing as well as ex post financing. More precisely, a multi-dimensional disaster risk management strategy is essential for providing guidance on how to tackle disaster events before they occur, and thus reduce losses, when they occur and after they have occurred.
To promote these efforts, Advancing Climate Risk Insurance Plus (ACRI+) has developed this toolbox for climate risk transfer in the agricultural sector in order to offer a systematic approach, providing guidance to decision-makers, international organizations, development agencies and practitioners on how to incorporate insurance approaches as part of the disaster risk management cycle.
Peter Hoeppe (Chairman of the Munich Climate Insurance Initiative)
In the face of growing weather extremes and profound shifts in climate conditions, the need is greater than ever to support individuals and governments in finding effective strategies to manage external shocks in order to build resilience to climate-related impacts. The Integrated Climate Risk Management approach, developed by MCII and GIZ GmbH under the project ACRI+, is expanding the framework of classical disaster risk management by adding financial transfer products to cover the residual risks. However, the potential of those products, such as insurance, are not only the application of these means as such, but also their integrative capability and additional leverage on other strategies.
This toolbox is not providing a blueprint to apply an ICRM. Those always have to be tailor-made to crop, country, hazards, etc. But it does give you a comprehensive overview of the different stages of an ICRM, the most important steps to take, the involved stakeholders as well as the possible synergies and spill-over effects when planning to add insurance solutions. Most importantly, however, it lists the questions political key personnel have to ask stakeholders (including themselves) when implementing an ICRM, and also provides you with the tools you need to address those questions.
This toolbox has been developed for the agricultural sector in developing countries to help stakeholders transfer their risks involved in extreme weather events. The agricultural sector inhabits a special role for our partner countries, their GDPs and worldwide value chains. On the other side it is the backbone of most economies and is most relevant for issues such as unemployment and food security. Climate risks represent a significant challenge to farmers, who see their livelihoods impacted, or to governments which lack the financial and institutional capacity to respond immediately and effectively to a disaster.
I am very glad to see the Toolbox for climate risk transfer in the agriculture sector available for our partners and peers. And I would like to extend my gratitude to all the other international organizations who brought in their experience and have supported the design of this toolbox.
Roland Gross (GIZ, Head of Competence Center, Financial Systems Development and Insurance)