The world faces a recurring set of hazards, including through climate change, that repeatedly put its people and businesses at high risk of lost assets, health, livelihoods, or even lives. Countries often fail to tap well-proven financial coping mechanisms, such as insurance schemes, that could boost resilience against such hazards. Insurance offers protection from the shocks of disasters and losses, as well as helps to de-risk investments and mobilize private investors. Moreover, the insurance industry has developed tools to determine vulnerabilities leading to enhanced climate and disaster risk informed investment decisions.

On 15 February 2024, the Asian Development Bank (ADB), with the support of India’s Department of Economic Affairs, organized a Regional Workshop on Climate Finance in New Delhi to discuss the role of insurance in financing climate risk. It explored how the private insurance market can help developing countries to reach the objectives of the Paris Agreement.  The workshop was attended by public and private stakeholders from India, Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka, Indonesia, Philippines, and Viet Nam.

Experts from within and outside the Asia and the Pacific region, including representatives of the German Federal Ministry for Economic Cooperation and Development (BMZ), Mexico’s Ministry of Finance, Toka Tu Ake Earthquake Commission in New Zealand, Turkish Catastrophe Insurance Pool, the Insurance Development Forum (IDF), InsuResilience Solution Fund (ISF), Global Risk Modelling Alliance (GRMA) and Global Shield against Climate Risk, shared their experiences in the moderated panel discussions covering public-private partnerships, de-risking energy efficiency investments, and national and regional insurance risk pools.

Key takeaways

• Insurance is more than just an industry; it is an institution of society. The potential for this big, new, old idea of insurance is huge - and the time is now.

• The possible applications of insurance solutions are broad, varied, and mutually reinforcing. Insurance can be used to both understand and structure risks; to both prevent and protect from climate hazards; to both adapt to climate impacts and transition to net-zero economy; and to both pool resources and de-risk investments.

• It is not easy to develop and implement solutions. However, there is a community of stakeholders ready and able to collaborate in a variety of ways.  

• Donor nations offering technical assistance and premium subsidies.
• The insurance industry and academia offering data and models as a public good.  
• Other nations offering lessons learned.
• Insurance supervisors keen to put the enabling environment in place to help close the protection gap.
• Development banks, like ADB, offering concessional products, services and expertise. 

• Progress must be demand led. Governments must come forward and lean into this community. Following this workshop, government officials are encouraged to seize the opportunity and reach out to those who are wiling to assist-- ADB, IDF, ISF, GRMA, Global Shield against Climate Risk, and the United Nations Development Program (UNDP).