Climate Risk Insurance Initiative for the Pacific officially launched

Pacific Small Island Developing States are highly vulnerable to natural hazards and each year face huge economic losses due to cyclones, droughts, earthquakes, volcanic eruptions and other natural disasters. The impact through some of these events have been exacerbated due to climate change. Given the limited climate disaster risk financing instruments available in the region, governments often resort to seek external aid assistance, borrow or reallocate budgets meant for other purposes, such as education, health or infrastructure.

 

This new initiative aims to develop affordable parametric and weather index-based climate risk insurance targeted at the agriculture, fisheries, retail and tourism sectors with specific focus on women, youth, migrants and MSME segments. The products and solutions will be piloted, tested and scaled during the inception phase of two years through an Inclusive Insurance Innovation Lab set up by the Programme. UNCDF will use its in-country presence, technical expertise and, decade long extensive experience in the Pacific to work with private sector financial service providers including insurance companies, reinsurers, mobile network operators and other private sector financial service providers, to, develop and deploy digital and other technology driven interventions to ensure last mile delivery.

 

Parametric insurance has the distinct advantage that it allows for much faster claim payments post-disaster since there is no need to undertake extensive assessments. The payments are linked to predefined triggers and also made digitally through mobile wallets and bank accounts. By combining the features of microinsurance, the beneficiaries will be covered for a relatively small, but adequate sums of insurance that will provide immediate relief and help recover faster and, in turn builds a stronger financial resilience.

 

The overall objective of the programme is to improve the financial preparedness of “Pacific households, communities, small businesses, organisations and governments towards climate change and natural hazards” through a combination of stakeholder engagement, co-creation of solutions, awareness and capacity building, innovative financing options and digital linkages – with a robust interface to the 2030 Sustainable Development Goals.

 

Officiating at the launch of the Programme, Jonathan Curr, the New Zealand High Commissioner, said, “The New Zealand Government and its people understand how devastating disasters such as tropical cyclones and floods affect our Pacific neighbours and we have always remained committed to supporting initiatives that will strengthen resilience and reduce economic losses during such events. New Zealand through the Ministry of Foreign Affairs and Trade is pleased to support this initiative as it fully aligns with the “climate action” agenda of the Government as well as its focus on disaster risk reduction in the Pacific to address vulnerabilities by building resilience, and providing agile and immediate post-disaster financial relief to affected individuals, households, communities and small businesses.

 

UNCDF Executive Secretary Judith Karl said, “The UNCDF Pacific Programme has always been a beacon of frontier ideas and innovation, first with several digital finance, micro insurance and pensions initiatives, and now for the first time ever with a focus on climate and disaster risk insurance. We are once again pleased to undertake and lead the implementation of a joint programme in the Pacific, following the successful Pacific Financial Inclusion Programme with UNDP, this time by adding the United Nations University based in Bonn, Germany.”

 

Levan Bouadze, Resident Representative of the UNDP Pacific Office in Fiji said, “Climate Change is a huge development challenge in the Pacific and through this joint initiative, the Programme will unleash opportunities for deploying climate disaster risk financing tools and instruments like parametric insurance that have direct relevance to the achievement of the Sustainable Development Goals.”

 

In his congratulatory remarks to UNCDF, UNDP and UNU for the launch of the joint programme the RBF Governor Ariff Ali added that “as a region prone to natural disasters which has long lasting impacts on our economic growth, we support the launch of the Programme as this initiative aims to fulfil a long-pending need and aspiration of the Pacific countries. We at RBF look forward to working closely with the project team in fostering innovation balanced with risk-based supervision, all aimed at ensuring a customer-centric approach and protecting their interests.

 

Dr. Shen Xiaomeng, Director of UNU-EHS said, “we at UNU-EHS are delighted to partner with UNCDF and UNDP in launching the Pacific Insurance and Climate Adaptation Programme. Our research clearly documents that Pacific Islanders are being hit by more intense natural hazards. This new initiative will play an important role in helping people and communities to get back on their feet and immediately start the recovery process.”

 

The Launch was attended by senior government officials, representatives of the diplomatic corps, staff of the New Zealand, Australia and UK High Commissions, the EU delegation,  Heads of UN Agencies, private sector representatives including Fiji based financial and insurance service providers, including mobile network operators, civil society and NGO partners and media representatives.

 

Participants from the UNU-EHS based in Bonn, Germany, staff of the Ministry of Foreign Affairs and Trade (MFAT), New Zealand based in Wellington and Port Vila, Vanuatu, staff of the Reserve Bank of Vanuatu all joined virtually.