The Global Shield is an initiative that aims to help countries close the protection gap against climate risks. In response to the increasing frequency and intensity of climate disasters, the V20 Finance Ministers together with the G7 (Group of Seven) and other supporting countries launched the Global Shield at the COP27 climate summit in Sharm El-Sheikh in 2022. One year after its launch, the Global Shield is already operational in several countries, including Ghana and Pakistan.
We spoke to Astrid Zwick, the Co-Director of the Global Shield Secretariat, and asked her about the progress made in microinsurance, what difference the Global Shield could make and what additional support countries might need to tackle the impact of climate change.
The microinsurance or inclusive insurance space has seen much innovation over the last 10-15 years, much of which you may have witnessed. From your perspective, how has innovation evolved?
Microinsurance has evolved through different waves. The early efforts we saw 20 years ago focused on building partnerships with existing insurers. This was foundational: at the time, we hoped microinsurance buyers today would become insurance buyers tomorrow. However, insurers found that the costs of introducing these insurance products to populations that have never used insurance before were high while the microinsurance gains were small – it became challenging to get products off the ground without public-sector support. This certainly affected the development of microinsurance.
This has started to change. Over the last five to six years, private sector involvement has increased through public-private partnerships (PPPs). This has helped to develop an enabling environment for several inclusive insurance markets, providing a new opportunity for inclusive insurance to develop further. Technological advancements and digitalisation have also helped significantly to drive innovation, particularly in terms of distribution and data analytics.
The Global Shield is a new approach to building climate resilience. It has the potential to be a game-changing initiative in driving solutions to protect those most affected by the impact of climate change. What differentiates the Global Shield compared with other or previous approaches to improving climate resilience?
The Global Shield was formed in response to the growing recognition that climate change is a major threat to many low- and middle-income countries. These countries are often the most vulnerable to the impacts of climate change, such as floods, droughts and wildfires.
Compared with previous approaches to improving climate resilience, the Global Shield stands out through its emphasis on country ownership, demand-driven solutions and the convening and coordinating of stakeholders. It aims to promote comprehensive and strategic collaboration between national and international actors to develop tailored solutions to the specific needs of vulnerable populations. It also enables funds committed by supporting countries to be channelled within a new financing structure.
The initiative offers a range of tools to make insurance more affordable to affected countries. These include financial instruments (e.g., index insurance, contingent credit and sovereign catastrophe bonds), technical support (e.g., risk assessment and disaster risk management strategies) and premium support. The Global Shield offers a promising new approach to minimise losses and damage, and has the potential to make a significant difference to vulnerable countries.
How will “pathfinder” countries be expected to drive progress at the micro, meso and macro levels, and what additional support might they need to overcome any gaps they have?
Since its launch at the end of 2022, the Global Shield has successfully initiated its work in several pathfinder countries, including Ghana and Pakistan, and in the Pacific Island States. Following a series of comprehensive multi-stakeholder consultations, Ghana became the first country to submit a Request for Support to the Global Shield at COP28.
Ghana serves as good practice on how Global Shield pathfinder countries can drive the process and take the lead on bringing together national stakeholders to identify gaps and implement appropriate solutions. These stakeholder groups include government institutions, the private sector, civil society organisations, and development and humanitarian actors. Together, they can determine which solutions should be developed to meet the needs of the most vulnerable populations. This is necessary for a long-term and sustainable solution.
Governments in each country have a crucial role to play: they can determine which groups can be effectively served by sovereign-level products, such as adaptive social protection. The private sector can support the development of sustainable insurance markets in pathfinder countries.
Despite these joint efforts, pathfinder countries may require additional support in areas such as capacity building, data management and policy development. Part of the Global Shield’s mandate is to provide such support and facilitate knowledge-sharing among participating countries. The Global Shield looks forward to continuing to work closely together with countries to provide this coherent and comprehensive approach to pre-arranged financing.