Climate Risk Adaptation and Insurance in the Caribbean Project - - PowerPoint PPT Presentation

Climate Risk Adaptation and Insurance in the Caribbean Project (CRAIC II)

Enhancing resilience to natural disasters through financial innovation and insurance at the microinsurance level…

Structure of Session

Module 1 – Natural Disasters and the Caribbean Landscape Module 2 – Disaster Risk Financing (Sovereign and Microinsurance) Module 3 – Weather- related Microinsurance and the Livelihood Protection Policy Module 4 – Role of Stakeholders in the Public and Private Sectors Module 5 – Social Protection and Disaster Risk Reduction

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▪ MCII is a leading think tank and NGO on climate change adaptation, disaster risk management and financing, specialized in insurance-related solutions. We provide insurance-related expertise on climate change impacts and explore ways how to develop sustainable approaches for risk reduction in vulnerable countries. ▪ CCRIF is the world's first multi-country multi-peril risk pool based on parametric insurance and provides insurance to 19 Caribbean and 2 Central American governments. CCRIF allows countries to increase their financial response capacity in the aftermath of natural disasters by quickly providing short-term liquidity when a policy is triggered. CCRIF products are for tropical cyclones, earthquakes, excess rainfall and for the fisheries sector. ▪ The ILO’s Impact Insurance Facility is enabling the insurance sector, governments, and their partners to embrace impact insurance to reduce households’ vulnerability, promote stronger enterprises and facilitate better public policies. ▪ Munich Re is the world´s largest reinsurer and supporter of the Munich Climate Insurance Initiative (MCII). Munich Re contributes its expertise on product structuring and risk modelling, ▪ DHI supported the trigger design, risk modelling and satellite data monitoring for the microinsurance products under CRAIC.

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CRAIC Project Partners

Module 1: Natural Disasters and the Caribbean Landscape

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Disasters have crippled Caribbean economies and budgets

Higher fiscal deficits and public debt ratios Challenges in key industries Larger trade deficits Population migration

Total damages to the region from 148 disasters (1950 – 2014)

$52

billion

PART II

C A R I B B E A N E C O N O M I C R E V I E W A N D O U T L O O K

The economic costs of natural disasters have been significant

Economic Costs of Storms in the region

2004 Ivan

200%

• f Grenada’s

GDP

96%

• f Dominica’s

GDP

2015 Erika 1989 Hugo

434%

• f Montserrat’s

GDP

2017 Maria

225%

• f Dominica’s

GDP

Economic Costs of Storms in the region

Economic costs of natural disasters for Latin America and the Caribbean have increased dramatically over the past century…

• The frequency of

hazards and disasters is increasing

• Mortality resulting

from disasters seems to be decreasing

• Economic costs of

disasters are rising precipitously

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In the Caribbean, adverse climatic conditions have affected

• ver 1.5 million people directly and

caused over USD 52 billion in total damage from 148 disasters over the last three decades from 1950 – 2014

2017 was yet another defining moment for the Caribbean after suffering the devastation caused by two category 5 hurricanes within 14 days of each other. Damage and loss due to these storms has been estimated at approximately US$130 billion and affected 18 countries, including CARICOM member countries

Some Other Examples – Caribbean and Central America

Tropical cyclones in 2017 caused losses in the Caribbean estimated at US$93,455 million, the highest level ever reported Hurricane Ivan in 2004 had a devastating impact on Grenada causing damages valued in excess of 200% of the country’s GDP The average cumulative (1970-2002) damage of natural disasters in the Eastern Caribbean was equivalent to 66% of annual GDP The 7.0 magnitude earthquake in Haiti in 2010 caused over 300,000 deaths, displaced over three million people and made more than a million homeless Hurricane Mitch, a category 5 hurricane devastated Central America in November 1998. A United Nations report estimated that the destruction caused by Hurricane Mitch in Central America would set back development in this region by 20 years

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The Impact of Natural Disasters in the Caribbean

• According to Moody’s, the average annual damage

from natural disasters over 1980-2015 was 1.5% of GDP in emerging markets vs. 0.3% of GDP in developed economies. The average share of affected population over the same period was 3.0% in emerging markets vs. 0.4% in developed economies.

• Among the 20 most vulnerable countries globally,

more than half represent small island states across the Caribbean and Pacific Regions. These 20 countries bear average losses between 20.1% and 2.1% of their respective GDP every year. The countries in the Caribbean that are referenced include Belize, Jamaica, The Bahamas, St. Vincent and the Grenadines.

• Immediate access to liquidity is critical for

governments and individuals post disaster

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Vulnerability Low Coverage Liquidity Debt Burden

A Note on Insurance Penetration in the Caribbean and Central America

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In developed countries, insurance and capital markets are widely used to hedge the immediate adverse impacts of natural disasters. According to MunichRe, more than 40% of the direct losses from natural disasters are insured in developed countries. Less than 10% of losses are covered by insurance in middle-income countries and less than 5% are covered in low-income countries. Climate risk insurance for individuals is mostly absent in the region, except for very few agricultural insurance schemes.

Climate Change and Disasters

• Climate Change changes the

magnitude and frequency of extreme events

• Climate Change changes

average climatic conditions and climate variability, affecting underlying risk factors

• Climate Change generates

new threats, which a region may have no experience in dealing with

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Linking Fiscal Policies with DRM

• Natural disasters and financial crises are typically exogenous events that

represent covariate shocks across a country and households

• Economic damages from natural hazards can jeopardize the health of national

economies at a level comparable to or greater than that of financial crises

• Natural disasters also destroy human and physical capital stocks of countries –

something that financial crises do not

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Including Disaster Risk in Fiscal Policy

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It is becoming increasingly commonplace for governments to consider the inclusion of disaster risk in fiscal policy as this provides an efficient way for countries to financially protect themselves against events that cannot be prevented. CCRIF has demonstrated that disaster risk insurance can effectively provide a level of financial protection for countries vulnerable to tropical cyclones, earthquakes and excess rainfall. The Facility quickly provides financial liquidity when a country’s policy is triggered – providing payouts within 14 days after an event. While these payments are relatively small compared to the

• verwhelming

cost of rebuilding, all recipient governments have expressed appreciation for the rapid infusion

• f liquidity, which

they are able to use to address immediate priorities.

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Module 2: Ex-Ante and Ex-Post Risk Financing – Sovereign and Micro Levels

Disaster Risk Management Strategies

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Ex-Ante

Ex-ante risk financing instruments require proactive advance planning and really involves investing in national catastrophe risk management prior to a natural disaster occurring.

Ex-Post

Ex-post instruments are sources that do not require advance planning. These instruments include budget reallocation, domestic credit, external credit, tax increase, and donor assistance.

Disaster risk management strategies include risk reduction by increasing investment in mitigation and prevention – commonly referred to as disaster preparedness – but also include a series of alternative instruments for loss financing – commonly referred to as risk financing instruments

Risk Financing Instruments

Ex-post strategies provide emergency response, rescue and emergency relief services in the aftermath of natural disasters and really is an example of a pure public good.

Sovereign Liquidity Gap

After A Disaster: Sovereign Liquidity Gap

Disaster Risk Financing Layering Approach

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Governments should build a financial protection strategy that combines a number of instruments that address different layers or types of risk. Such a strategy incorporates budget allocations and reserves, contingent credit, and risk transfer instruments.

Examples of Ex-Ante Financing Instruments

Examples of Ex-Ante Instruments

Dedicated reserve fund Contingent credit facility Traditional Insurance Catastrophe bond, other catastrophe-linked instruments / alternative risk transfer instrument

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CCRIF is the world's first multi-country multi-peril risk pool based on parametric insurance and provides parametric catastrophe insurance for Caribbean and Central American governments. CCRIF operates as a not-for-profit

• rganization and

currently provides its products and services to 21 Caribbean and Central American countries. Unlike indemnity insurance, CCRIF’s parametric insurance products are insurance contracts that make payments based on the intensity of an event and the amount of loss calculated in a pre-agreed model caused by these events. CCRIF represents a cost-effective way to pre-finance short- term liquidity to begin recovery efforts for an individual government after a catastrophic event, thereby filling the gap between immediate response aid and long-term redevelopment.

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CCRIF – Example of Ex-Ante Financing Instrument

CCRIF Products

Fisheries

Launched in July 2019 through Caribbean Oceans and Aquaculture Sustainability Facility (COAST)

Agriculture Model

being developed. Potential partners: CDB, EU

Drought Product will

be made available 2019/20 to countries expressing an interest Public Utilities to be developed for 2020/21

Tropical Cyclone

wind and storm surge

Earthquake Excess Rainfall

Since 2013

Microinsurance - Climate Risk Adaptation and Insurance in the Caribbean project

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Implemented by Munich Climate Insurance Initiative, in collaboration with CCRIF SPC, International Labour Organization’s Impact Insurance Facility, DHI Water & Environment and GK Insurance. LPP available in Saint Lucia, Jamaica – and being expanded to Grenada, Belize and Trinidad & Tobago

• Targeted at individuals, the LPP is designed to

help protect the livelihoods of vulnerable low- income individuals such as small farmers, tourism workers, fishers, market vendors and day labourers, by providing quick cash payouts following extreme weather events (specifically, high winds and heavy rainfall).

• Essentially, the livelihood protection policy is

designed to reduce vulnerability and sustain the livelihoods of low-income communities.

The Livelihood Protection Policy

COAST - Caribbean Oceans and Aquaculture Sustainability Facility

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• The COAST parametric insurance

product will provide cover for losses attributed to the fisheries sector due to unusually bad weather conditions, and/or high wind and storm surge caused by tropical cyclones throughout the policy year. Bad weather will be considered for a first tier, with the tropical cyclone model considered for a second and third tier.

Parametric insurance product at a scale relevant to vulnerable fishing communities.

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Uniqueness of CCRIF Policies and Parametric Insurance

• Unlike indemnity insurance, CCRIF’s

parametric insurance products are insurance contracts that make payments based on the intensity of an event (for example, hurricane wind speed, earthquake intensity, and volume of rainfall) and the amount of loss calculated in a pre-agreed model caused by these events.

• Parametric insurance enables payouts to

be made very quickly after a hazard event.

• CCRIF therefore represents a cost-

effective way to pre-finance short-term liquidity to begin recovery efforts for an individual government after a catastrophic event, thereby filling the gap between immediate response aid and long-term redevelopment.

Parametric Insurance Products – How they Work

Parametric insurance disburses funds based on the

• ccurrence
• f a pre-

defined level of hazard and impact

Policy triggered on the basis of exceeding a pre- established trigger event loss Estimated based on wind speed and storm surge (tropical cyclones) or ground shaking (earthquakes) or volume of rainfall (excess rainfall) Hazard levels applied to pre-defined government exposure to produce a loss estimate Payout amounts increase with the level of modelled loss, up to a pre-defined coverage limit

Parametric vs Indemnity Insurance

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Parametric Insurance Indemnity Insurance Lower Premiums

Transaction and administrative costs are significantly lower Costs of assessing claims is added to the premium

Faster Payouts

Provides payments based on a pre-defined level of hazard and impact Need for on-the-ground assessment adds lag time – months or even years – to payment

Objective & Transparent

Allows the policyholder direct access to information on which the payouts will be calculated. Calculation of payouts is totally objective, based on a few simple input parameters published widely in the public domain from the globally-mandated bodies responsible for estimating those particular parameters, and a set of formulae which form part of the policy. Opinions on level of loss can vary by loss adjuster. Also, traditional indemnity insurance customarily has various conditions, exclusions and limitations that may introduce uncertainty and delay for an insured making a claim.

Uniformly Defined Risk

All risk – which drives policy pricing – is defined using the same specified parameters There is often some subjectivity in the definition of the risk.

Reduction in Moral Hazard

The cost of insurance can be immediately related to the probability of an event, and the payout is independent of any mitigation efforts put in place after the policy is issued. Policyholders may engage in riskier actions if they have purchased a policy against an event.

Simplified Claims

Claims process is reversed. The insurer informs policyholder of payment. Governments do not have to provide detailed asset values and other information prior to the insurance programme commencing. Making a claim is a tedious process and can often take several months to complete.

Reasons for Pursuing Ex-Ante Financing Instruments

Three reasons governme nts should pursue ex-ante financing strategies

Governments are typically responsible for large portfolios of public infrastructure assets subject to risk To guarantee sufficient capital for emergency relief and assistance to affected households, businesses and communities. If governments lack the necessary infusion of post-disaster capital to rebuild critical infrastructure, restore homes and provide humanitarian assistance, indirect costs can greatly surpass the direct losses of a disaster Developing countries have a higher propensity for post-disaster resource deficits. Governments of developing countries typically must divert from their budgets or from already disbursed development loans to finance post-disaster expenses, also relying on new loans and donations from the international community

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CCRIF – An Example of a Disaster Risk Financing Strategy

• Managing this risk requires a multifaceted approach
• CCRIF provides options for managing a portion of the identified risk, but CCRIF’s parametric

insurance policies should not be viewed as a panacea.

• Other mechanisms can and should be implemented alongside risk transfer to provide a

comprehensive sovereign risk financing strategy which best balances budgetary conditions with the need to manage the ongoing economic liability which natural disasters present.

CCRIF Payouts – 38 total payouts

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Uses of CCRIF Payouts

• Provision of food and shelter for

displaced persons

• Immediate recovery e.g. clearing silty

rivers, unblocking major roads, stabilizing drinking water plants

• Stabilization of government processes
• Provision of civilian security
• Purchase of medication
• Assistance to agriculture sector
• Repairs to roofs, bridges, roads
• Capitalization of a special recovery fund
• Acquisition of building materials for

affected persons

Use of CCRIF Payouts

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Approximately 2.5 million persons have benefitted from CCRIF payouts since 2007.

Module 3: Weather Related Microinsurance

Microinsurance is the protection of low-income people against specific perils in exchange for premium payments proportionate to the likelihood and cost of the risk involved.

The Climate Risk Adaptation and Insurance in the Caribbean (CRAIC) project seeks to address climate change, adaptation and vulnerability by promoting weather-index based insurance as a risk management instrument in the Caribbean. ▪ To help target countries increase social resilience and incentivize sustainable adaptation measures by incorporating climate risk insurance within a broader framework of disaster risk reduction strategies. ▪ Tosupport the development of weather-related risk management solutions, includinginsurance. ▪ To support the development of public-private insurance solutions, so financial support is extended to the most vulnerable groups. ▪ Todemonstrate the value of a regional risk pooling instrument in climate change adaptation and risk management. ▪ Central to the project’s agenda is its role in the transfer of learning and experience to further North-South, as well as South-South exchange

CRAIC Project Vision CRAIC Project Objective Partners

The project is funded by the International Climate Initiative (ICI) of the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU). It is implemented by the Munich Climate Insurance Initiative (MCII), in collaboration with CCRIF SPC, DHI, ILO and Munich Re together with local Ministries, National Disaster Management Agencies, Regulators and Distribution Channels (e.g. credit unions, cooperatives, farmers associations, rural banks, etc.)

CRAIC Project – An Example of Weather Related Microinsurance in the Caribbean

2017 2011 2013 2015

CRAIC project launch and conceptualization of ▪ Livelihood Protection Policy (LPP) a weather- index based policy designed specifically to help vulnerable, low-income individuals recover from the damage caused by strong winds and/or heavy rainfall during hurricanes and tropical storms. ▪ Loan Portfolio Cover (LPC), a meso level parametric policy to protect financial institutions from loan default after heavy rain/ strong winds. LPP was launched in St. Lucia in 2013 and later in Jamaica. ▪ Targeted at all individuals irrespective of income level and sector, LPP fills a gap that no risk transfer instrument in the Eastern Caribbean has filled. ▪ Timely disbursement of payouts allowed policy holders to quickly rebuild their livelihoods after an extreme weather event. ▪ “Potential to be a good complement to national efforts on rehabilitating affectees

• f extreme weather events.” - Testimonial

▪ It also allowed insurers to broaden their consumer base. ▪ In total, 600 LPP policies have been sold in the two countries. ▪ To date four payouts have been made in St. Lucia amounting to EUR 112,774; while

• ne

ex gratia payment has been made in Jamaica. ▪ The total premium collection for 2016 stands at EUR 31,904 for St. Lucia and EUR 16,160 for Jamaica. Launch of CRAIC Phase II ▪ Project Duration: 1.11.2016 (effectively June 2017) – 31.10.2019 ▪ Priority Target Countries: Jamaica, Saint Lucia, Grenada, Belize, Trinidad & Tobago. ▪ Donor: Bundesministerium für Umweltschutz, Natur, Bau- und Reaktorsicherheit (BMUB) ▪ Project won the “Momentum for Change 2017 Lighthouse activity” award. ▪ CRAICC II aims to refine the existing LPP product and revive it with additionalfeatures. ▪ Scale-up the implementation

• f

climate risk insurance by expanding the number of countries where climate risk insurance isavailable. ▪ Increase the measurable links to disaster risk reduction policies and practices of participating countries. ▪ In addition, the project aims to increase awareness

• f livelihood protection, adaptation, and insurance

in participating countries, and to contribute knowledge to regional and international policy processes like the UNFCCC. 11

CRAIC: Project Timeline

CCRIF and Microinsurance

Two main products supported and/or developed by CCRIF:

• Microinsurance product developed for fishers under COAST Project with

support from Governments

• Key Partner in the Climate Risk Adaptation and Insurance in the Caribbean

(CRAIC) Project (Livelihood Protection Policy - LPP)

How does Microinsurance help Vulnerable People?

• Microinsurance is intended to provide some stability to

the financial situation of vulnerable, low-income individuals after a disaster through the injection of quick liquidity, thereby allowing then to avoid adopting coping strategies that could lead them deeper into poverty.

• It will help people whose livelihoods are affected,

without them having to wait for help from “external” sources like the Government. It would enable farmers for example to have a source of immediate funding to undertake activities such as replanting, draining fields and reconstructing irrigation systems

• Could improve the credit worthiness of individuals in

the long term, giving them access to financial services that they previously may not have had access to

• Microinsurance is a clear example of proactive planning

for DRM at the individual level

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How does Microinsurance help Vulnerable People?

Target Market for Microinsurance

Microinsurance… providing coverage at the individual level, perfectly complements CCRIF’s government-level insurance

Farmers, fishers, market vendors, construction workers, tourism workers, food vendors, MSMEs, among others

Importance of Microinsurance and Key Benefits

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• Example: Farmer has crop losses, smooth consumption, prevent

the sale of productive assets Often the only option available to protect against setbacks

• Insured entrepreneurs are able to better manage their financial

situation and can take riskier productive decisions

• Example: Tourist operators can expand their business via a loan

knowing that if something unexpected were to occur and impact their income, the insurance will provide a safety net Opens up investment opportunities Importantly – it helps avoid the poverty trap

Microinsurance does not refer to:

The size of a scheme’s membership The total value of premiums amassed or assets insured A particular type

• f institution or

delivery channel A particular class

• f risk (e.g. life,

health, crop, livestock, etc.) The presence of a subsidy

CRAIC - Livelihood Protection Policy (LPP)

• Weather-related microinsurance

refers to policies specifically designed for low-income populations which provide coverage for physical assets or livelihoods in the event of a weather hazard

• The LPP is an innovative new

microinsurance product

• It will provide insurance coverage for

vulnerable persons such as farmers and seasonal tourism workers, market vendors etc. against extreme weather

The LPP

It is a parametric weather index-based insurance product It combines risk reduction and insurance for low-income groups It covers high rainfall and high winds It is intended to provide policy holders with funds within a short period of time – 10 to 14 days It provides individual payouts that are tied to a series of thresholds for wind speed and rainfall It uses an information system that uses mobile text messages to inform clients quickly if a policy is triggered

What is the Livelihood Protection Policy (LPP)?

Microinsurance: providing market-based protection in exchange for premium payments proportionate to the likelihood and cost of specific perils involved.

• Parametric insurance product
• Not linked to a specific asset
• Triggers are based on Excess rainfall & Strong

wind speed (future: drought)

• Covers both actual and related losses

Currently operational: Saint Lucia and Jamaica.

To be implemented in Grenada, Belize, and Trinidad & Tobago.

How the LPP Works

Structure of the LPP – Case study – Jamaica

Policies are triggered based on the values of wind speeds and rainfall levels. These “trigger values” are based

• n

actual weather conditions in various areas and are different for policyholders depending on where they live. The insurance payout amount is calculated as a percentage of the amount of coverage that was purchased. The more extreme the event, the larger the payout.

Premium Paid by the individual. Claims A pay-out (claim) requires no documentation or proof of loss and is made within 10-days Flexible ANYONE can buy the LPP regardless of occupation. Coverage is available for individuals and groups Affordable Polices sold in units where persons can purchase their required amount of coverage up to 10 policies/units Coverage A 10-day waiting period once the premium is paid, after which the insured party receives protection for 12 months Basis Risk There is a chance that the pay-out calculated does not match damages experience on the ground

Key Features of the LPP

LPP – Payouts

Payouts to policyholders

• Saint Lucia: First payouts made in January 2014,

following a trough in December 2013 – ‘Christmas rains”.

• Saint Lucia: In 2016, small farmers and other

individuals received payouts due to TC Matthew

• 31 policyholders received payouts totalling

US$102,000 - an average of US$3,290 per policyholder

• Jamaica: Policyholders received a payout

following an excess rainfall event in May 2017 and in April 2018 The LPP and CCRIF are expected to support the Climate Risk Insurance in Developing Countries initiative of the G-7, which aims to increase the number of people with access to direct or indirect climate risk insurance coverage by up to 400 million by 2020

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Module 4: Role of Stakeholders

Relevant Stakeholders

Target market/ population Government ministries

• Finance
• Agriculture
• Social Security
• Tourism

Insurance Regulator Local Insurance partners Distribution Partners

• Agents/Brokers
• Banks & credit

unions

• Cooperatives/

affinity groups

Broader Support

• MCII
• CCRIF
• ILO
• DRM Agency

Role of Governments and Municipalities

Governments and Municipalities

• Incorporate microinsurance as part of social protection strategy or within local

government departments purchasing group policies and using payouts to assist the most affected individuals or communities (purchase blocks of policies)

• Provide subsidies for policy premiums or waive the premium taxes or GCT/VAT
• Incorporate microinsurance/LPP into existing government rebates and subsidies

for the fisheries sector or agriculture sector

• Require purchase of LPP as part of registration process for fishers and farmers etc.
• Include insurance requirements in fisheries policies, agriculture policies or in

MSME policies

• Sensitize vulnerable persons/low-income persons to the importance of insurance

and these new microinsurance products in general

Role of Private Sector and NGOs

Local Insurance Companies

• Bringing the concept to market
• Collecting and using data for risk assessments
• Social Impact by increasing access to insurance

which helps beneficiaries avoid the poverty trap Other Private Sector Partners

• Supporting distribution frameworks to reach

widest range of customers often located in remote areas (example partnerships with MNOs)

• Maximizing position within the value chain (e.g.

Nestle connection to farmers) Cooperatives and NGOs

• Could purchase group

policies on behalf of members and could use shares to pay for premiums

• Support the idea of

microinsurance and sensitize members and communities

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• Microinsurance

products focus on the poor, and thus may need special consideration as compared to traditional insurance regulations.

• Addressed in some

markets by creating microinsurance-specific regulation or the granting of special exemptions to established standards.

Role of the In Insurance Regulator: A Bala lancin ing Act

(1) Creating Enabling Frameworks

• Tax exemptions or reductions in

fees

• Lower capital requirements
• Revision of sales agent and/or

distribution channel requirements

(2) Consumer Protection

• Supervision of stakeholders and

product distribution practices

• Acceptable basis risk levels & basis

risk management protocols

• Establishing protocols for dealing

with complaints

Challenges of Offering Index-based Microinsurance

• Pricing the product

– Providing affordable risk-transfer for individuals and commercially viable to insurers – High frequency events such as excessive rainfall result in disproportionately high insurance premiums

• Limits to insurance as a tool to manage climate risk

– Lowest income groups often unable to access market-based insurance, unless premiums are subsidized or other supporting measures are provided – Non-weather related risks are not covered

• Education is needed on insurance

– Need to explain the premium/trigger/payout mechanism and the basis risk. – Frequent payouts vs. meaningful payouts & cost

• Distribution and Scaling up

– Relatively small populations – Reaching target market in rural areas and who do not participate in financial systems – Requires commitment by private, local insurers to increase risk awareness and

• vercome the reluctance to buy insurance

✓ Governments can play a key role –

✓ Link to reducing poverty and vulnerability and social protection strategy

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A Note on: ‘Climate smart’ or ‘adaptive’ social protection

Advantages of Social Protection

• Social protection is necessary to be sure that no one is left behind
• Useful for efficient targeting – better access to vulnerable groups
• Social Protection systems can help absorb the impacts of climate shocks by providing

direct support to affected populations Weaknesses

• Safety nets can be inefficient if shocks become too frequent and intense
• Limited flexibility of contingent funds for scaling up efforts in a crisis

Products like the LPP fill the gap by ensuring the ones who are better off have some immediate assistance when there is a disaster.

Linking insurance & social protection

Risk Layering

• Target different groups

– Safety net for most vulnerable – Insurance for those who can afford it

• Faster Cash Transfers

– Index-based insurance – (Forecast based financing)

• Contingency financing mechanism for governments to temporarily scale up

shock-responsive social protection in anticipation or response to a shock.

– Increase either the value or the duration of benefits (vertical expansion) – Increase the number of beneficiaries flexibly to include people affected by a crisis (horizontal expansion)

• Hybrid products

– Combining macro-insurance solutions – Government pays all or a partial premium with social safety nets – May be appropriate when trying to target the ‘bottom of the pyramid’ poor

23 Source: InsuResilience Global Partnership

Why Disaster Risk Management is important?

23 Source: InsuResilience Global Partnership

1

• Important to understand that Insurance is not intended to be a complete and

comprehensive disaster management strategy – it is not a silver bullet.

2

• Insurance is best for low frequency/high impact events. Other RM options must be adopted

for more frequent events.

3

• In order to become resilient, risk prevention and preparedness measures need to be applied

– disaster risk management strategies

4

• Disaster risk management and mitigation is critical to the disaster preparedness equation; but

to this equation must be added risk transfer and risk financing; as well as the potential psychological impact of people. In short, our disaster preparedness equation should read:

Disaster risk mitigation + ecosystem management + risk transfer and risk financing + social protection strategies (including psychological impact of future disasters on our populations) = financial protection strategies = preparedness.

• Mainstreaming climate change issues into sectoral policies (e.g, tourism,

agriculture, etc) at the national level and other decision-making processes

• Adopting best practices for climate change adaptation, including through

national policy development

• Creating and strengthening national platforms for hazard risk reduction
• Modernizing legal frameworks to address hazard risk reduction and vulnerability
• Employing strategies for the sustainable management and use of environmental

and natural resources – and carefully focus on areas such as watershed protection and waste management, which have “ridge-to-reef” impacts

Some Examples of Disaster Risk Management Strategies

• Establishing measures to incorporate hazard risk reduction in land use practices

and the development of human settlements

• Implementing modern building codes
• Putting in place the necessary infrastructure such as sea walls to protect

coastlines etc.

• Conducting vulnerability impact assessments of communities and determining

best practices and actions to reduce future vulnerability

• Capacity building and training in disaster risk management and climate change

adaptation

Some MORE Examples of DRM Strategies

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Alignment of Insurance to Agenda 2030 – Sustainable Development Goals (SDGs)

The work we do in Insurance today is directly aligned to 10 of the 17 SD goals:

Video Training and Capacity Building DRM Guides S MS Messages Group DRM S

• lutions

Methods for linking DRM to the LPP

Increasing Awareness of Insurance through Volunteers in the Caribbean

• 6 United Nations Volunteers active in Jamaica and St. Lucia in 2018
• More than 1000 people were trained over a 6 month period

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4 in Jamaica 2 in St. Lucia

Their objective was to raising awareness about: 1) Disaster risk reduction 2) Climate risk insurance 3) Linkages between them, advantages and limitations 4) Availability of LPP in the region

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Dirk Kohler

Project Manager Kohler@ehs.unu.edu

Jennifer Phillips

Project Associate Phillips@ehs.unu.edu

Tara James

Local MCII Coordinator James@ehs.unu.edu

Shaily Vyas

Insurance Associate Shaily@ehs.unu.edu

Samet Bulut

Project Assistant Bulut@unu.ehs.edu

Contact Details

Elizabeth Emanuel

Technical Assistance Manager and Corporate/Development Communications Manager; CRAIC II focal point for CCRIF SPC CCRIF SPC Technicalassistace@ccrif.org Daniel McGree ILO Impact Insurance Fellow McGree@iloguest.org