After meeting in Germany this week, the leaders of the Group of Seven (G7) countries have pledged to step up funding and insurance efforts for disaster risk and climate.
G7 leaders noted that their meeting in Elmau, Germany, took place at a time that represents a “critical conjuncture for the global community, to move towards an equitable world.”
While the invasion of Ukraine and Russia was clearly the main focus of discussions at this week’s G7 meetings, climate risk and climate finance received significant attention and the leaders of the G7 countries clearly wanted make a statement and therefore your statement is full of references. to advance the response to climate change, adaptation and climate risk.
“At a time when the world is threatened by division, we will jointly assume our responsibility and work with partners around the world to find solutions to urgent global challenges, such as tackling climate change and ensuring a fair transition, as well. how to address current and current problems. future pandemics and achieve gender equality, “the G7 leaders said in a statement.
Leaders reaffirmed their commitment to climate goals and recognized the effects that climate change has on global peace, prosperity and security, as well as the need for climate finance to fund the response and adaptation to climate change. .
“We recognize that the fight against climate change, biodiversity loss and pollution requires mobilizing private and public, national and international financial resources. To this end, we are committed to implementing other clear policies and strategies to align financial flows with our climate and biodiversity goals and we are committed to mobilizing resources from all sources, ”G7 leaders wrote.
They renewed their commitment to rapidly mobilize $ 100,000 million in climate finance by 2025 and at least double the provision of climate finance for adaptation to developing countries.
The most vulnerable countries are a clear focus and losses and damages received a mention again, although no significant loss and damage financing mechanism has now been created.
But they said “We recognize the urgent need to increase action and support to prevent, minimize and address losses and damage, especially in vulnerable developing countries.”
Climate risk insurance and reinsurance has an important role to play in loss and damage financing solutions and G7 leaders have also pledged to step up efforts in this area.
“We are committed to increasing funding and insurance for disaster and climate risk (CDRFI) and will work towards a global shield against climate risks, building on the Global InsuResilience Association and other initiatives,” the statement said. G7 leaders.
Adding: “We call on our Development Ministers to move forward on the Global Shield before COP 27.”
Through the Global Shield, it is hoped that fragmented approaches to disaster risk financing and climate insurance can be brought together to deliver greater benefits to the neediest and most at-risk countries.
Over time, the Global Shield initiative is expected to include losses and damage, as well as long-term climate resilience efforts.
It will have a broader approach to insurance and financing, ie there will be a clear role for the insurance and reinsurance sector, but perhaps also for the capital markets, when it comes to developing a financing mechanism. of effective losses and damages and the necessary financial infrastructure, as well as the participation of private capital, to support it.
What those driving the development of disaster risk financing and climate insurance solutions should avoid is a repetition of recent history where many existing and disparate disaster risk insurance initiatives have been grouped under a same umbrella for completely wrong reasons, of being able to report. greater number of lives covered.
This has led to a lack of coherence in individual efforts to expand insurance to the poorest and most vulnerable, while any economies and scale efficiencies appear to have been lost in the process.
For this reason, it seems to put some sharp minds in the development space, along with experts in insurance, reinsurance, securities linked to insurance (ILS) and financing, to develop disaster risk financing and climate insurance tools that really achieve the goal of providing Loss and damage financing, together with broader R&D financing efforts, can yield better results, leveraging best practices and innovation to build a facility that can meet global needs from scratch.
The Global Shield initiative is an opportunity to think bigger and start from a clean slate, adopting best practices on how to deploy capital to those affected by climate disasters, along with the need to fund adaptation, resilience, response and recovery.
G7 leaders also say they want to increase funding for nature-based solutions, which is another area where lessons could be learned from projects that have integrated parametric risk transfer, with insurance or market funding. of capital, to provide disaster risk financing and an efficient system. capital solution to support communities that depend on natural resources and infrastructure.
There is a lot of innovation in this area in the insurance, reinsurance and ILS market, which could be taken as a basis for developing loss and damage risk financing solutions that can have a much greater effect on people who do so. they need.
It is therefore encouraging to see that the G7 is committed to increasing efforts in climate disaster financing and risk insurance, but also the very important industry plays a key role with development organizations in building a scalable solution to deliver capital that has the ability to absorb and transfer risk.
Of course, we’ve heard these commitments before, most recently at the G7 meetings last summer, since little progress has really been made in financing losses and damage, as well as in the infrastructure of a facility. which will be necessary.
But it is important to see that the issue remains important on the agenda, even when these world-changing events, such as those in Ukraine, often occupy the time and attention of leaders.