Turning Climate Risk Finance Innovation into Better Protection

For countries, climate-related disasters disrupt lives, livelihoods, essential services and local economies. The Global Shield is advancing Climate and Disaster Risk Finance and Insurance (CDRFI) innovations to make financial protection more affordable, sustainable and effective. At the same time, Regional Risk Pools offer climate-vulnerable countries a unique value proposition. Offering parametric insurance products across member countries provides those countries not only with rapid pre-arranged financial protection after disasters, but also co-benefits with respect to risk analysis, risk awareness and wider risk management.  Yet volatile reinsurance costs, constrained capital and limited technical capacity can make this offer more expensive and difficult to sustain, ultimately limiting countries’ ability to protect vulnerable people and communities when disasters strike.

Through the Global Shield Programme for Resilient Risk Pools, the four regional risk pools – the African Risk Capacity (ARC Ltd.), the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC), the Pacific Catastrophe Risk Insurance Company (PCRIC) and the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) – are strengthening collaboration, including by assessing the feasibility of a potential Global Reinsurance Facility. This pioneering approach could combine and diversify climate risks across regions, improving access to international reinsurance and making risk transfer more efficient, particularly for vulnerable countries. By pooling risks and sharing technical capacity, the Facility could help stabilise insurance premiums and make financial protection more affordable and sustainable in the long term.

A complementary focus of the event is the new Global Shield Caribbean Approach, which aims to strengthen how financial protection is connected and delivered at regional and country levels in the Caribbean. Building on the region’s strong CDRFI experience, it seeks to overcome fragmentation by connecting country priorities, regional institutions and international support, while strengthening regional public goods and scaling solutions to address protection gaps for households, MSMEs and climate-vulnerable sectors.

This event brings these innovations together around a common purpose: turning innovative CDRFI systems into better protection for climate-vulnerable countries and people. It will explore how greater collaboration, from global risk pooling and reinsurance to regional and country-level solutions, can make protection more affordable, close protection gaps and better safeguard lives, livelihoods and development gains. The event will feature an announcement of new support from the German Federal Ministry for Economic Cooperation and Development (BMZ) to enable these innovations, underscoring Germany’s commitment to strengthening financial protection for those most at risk from climate impacts.