COP 28, which was hosted by the UAE last November, was an historic meeting, marking the first time that the outcome of the discussions explicitly called for a ‘transition away from fossil fuels.’ It was also the first time that food, water, health and biodiversity were explicitly included in the agenda, underlining the importance of viewing the impact of climate change with these themes in mind.
In addition, the topic of climate finance took a central role during the two weeks of the conference. All good intentions to act against climate change are useless unless there are financial mechanisms to support them. And there were strong policy signals and commitments from governments, private sector and NGOs in attendance around the significance of inclusive insurance in the battle to build resilience to climate change.
This thread wove throughout the different discussions that took place over the two weeks. Many highlighted the need for more innovative approaches to opening new sources of funding and helping communities most impacted by climate change to become more resilient, and this call to action was included in the Global Stocktake. While there is still much to be done in this area, there have already been several successful inclusive insurance initiatives rolled out across various countries, some of which were presented at COP28. This shows that there is positive progress being made and gives hope that microinsurance can expand to play a bigger role in building resilience among the most vulnerable in the world.
Important takeaways for inclusive insurance
Throughout COP28, there were many conversations around the different ways to address the climate crisis, from limiting global temperature rises and achieving net-zero emissions by 2050 to helping vulnerable communities adapt to climate change. This last point is where inclusive insurance has an important role to play, and there were several discussions and agreements that will help to set the direction and support the growth of the industry going forward. Below are some of the key ones:
One of the central outcomes to COP28 was the first ever Global Stocktake. It contains every element that was under negotiation and will be used by countries to develop stronger climate action plans for 2025. The stocktake recognised that many parties to the Paris Agreement are still missing emissions targets to limit the global temperature increase. It also highlighted that, while billions of dollars have been committed to the various funds that support climate change action (e.g, the Green Climate Fund, the Least Developed Countries Fund and the Adaptation Fund), it is still far short of the trillions needed to support developing countries to implement their national climate and adaptation plans.
As a result, the stocktake laid out the need to reform the current multilateral financial architecture and to establish new and innovative sources of finance. It also emphasised the roles of different players, including governments, institutional investors and other financial organisations.
Another key milestone achieved at COP28 was the agreement to operationalise the Loss and Damage (L&D) Fund. The aim of the fund is to support vulnerable countries in dealing with the effects of climate change and can be used to support initiatives that help to manage risk and build resilience across micro, meso and macro levels. The discussions over the two weeks laid out the practical details of how the fund should function, and it was agreed that the majority of the 26-person board would come from developing countries. By the end of the conference many countries, including the UAE, Germany, the UK, Japan and the EU, had pledged a total of USD 770.6m.
The conference provided plenty of opportunities for organisations to present their plans and gain support for initiatives that increase resilience against climate change. For example, the Declaration on Sustainable Agriculture, Resilient Food Systems & Climate Action was signed by 134 countries who collectively produce 70% of the food we eat and who are responsible for 76% of all emissions from global food systems (25% of total emissions globally). When presenting the declaration, H.E. Mariam bint Mohammed Almheiri, UAE Minister of Climate Change and Environment and COP28 Food Systems Lead called for countries to put food systems and agriculture at the heart of their climate ambitions.
The Charter to Get Ahead of Disasters was signed by more than 40 countries and organisations and highlighted the "need to invest more in anticipatory action and in advocating for adaptation to take place in fragile contexts,” according to UNOCHA’s Zinta Zommers. And the Race 2 Resilience (R2R) campaign presented their progress report. Since it launched three years ago, the campaign has secured 34 partners and over 647 members, including 86 cities and 78 regions, all of which have made pledges targeting resilience actions across 164 countries. Collectively, they have mobilised USD 39.44bn. The report emphasises the critical role insurance plays in providing financial protection to climate shocks, as well as risk analytics and investment. It also highlights the collaboration between the Insurance Development Forum and R2R as a successful Private Public Partnership that is addressing the protection gap, building global resilience and accelerating collective effort.
Adaptation was another key topic at COP28, and parties agreed upon the targets and framework that are needed for the world to be resilient to the impacts of climate change. This was formalised in the Global Goal on Adaptation (GGA). The agreement signals a change from previous ones, putting adaptation focus and action on a par with mitigation. As part of the discussions, the role of finance was highlighted as being crucial to achieving its ambitions and the final text of the agreement urged developed countries to report on their progress towards doubling adaptation finance by 2025. It also recognised that finance needs to go significantly beyond this.
Examples of successful adaptation initiatives
And the importance of adaptation in supporting climate change resilience among vulnerable communities was demonstrated through many events which showcased how different sectors and industries - many through public private partnerships - have already developed and implemented locally led initiatives.
For example, one event showcased the progress made by the Nairobi Declaration on Sustainable Insurance (NDSI) which requires all signatories to commit to five pillars: risk management; insurance; investment; policy, regulatory and industry engagement; and sustainable insurance thinking and practices. Since its launch in 2021, the NDSI has already grown to over 130 signatories from 27 countries, including major insurance providers.
Another event showcased how AIA Group - the largest pan-Asian life and health insurer and one of the world’s largest insurers in terms of market capitalisation – is progressing with its sustainability efforts, and highlighted a couple of milestones, including becoming the first pan-Asian life and health insurer to have their near-term science-based emissions reduction targets validated by the Science Based Targets initiative (SBTi). This is encouraging in showing how major international insurance companies can lead the way in climate-focused insurance initiatives.
Finally, an event themed around “Embedding Parametric Insurance in the Disaster Risk Financing Toolkit” highlighted how parametric insurance is playing a critical role in the disaster risk management strategies of countries such as Tonga and the Cook Islands. It also emphasised the importance of pre-arranged finance in addressing the protection gap in disaster losses and, specifically, in helping people to learn how to better manage their risks.
The discussion focused on the importance of support from the international community in helping to achieve resilience through mechanisms such as the Pacific Resilience Fund (PRF). During the event, Ben Ponia, representing the Prime Minister of the Cook Islands thanked Germany for its support with the PRF. “It’s enabling the Cook Islands to increase the value of its policies. And for the first time, because we have been budgeting and paying for this insurance product, we can draw on that subsidy.”
Not only was COP28 an historic meeting for the global community in terms of the agreements around reaching net-zero targets and limiting global temperature increases, it was also a very positive meeting for the inclusive insurance sector. In addition to discussions and commitments made around financing for developing countries and the collective importance put on adaptation strategies, the fact that there were so many examples of how these ideas are already being successfully realised brings a lot of hope. We’re excited to see how the momentum from COP28 continues to build over the year and hopefully lead to change and innovation across the sector. And we can’t wait to explore how MiN, along with our partners, can support the scaling and development of inclusive insurance projects around the world.