Martin Kipping, Head of the Climate Policy Division at the German Federal Ministry for Economic Cooperation and Development (BMZ) shares his views with GIIF on COP26 and Germany’s commitment to strengthening the resilience of poor and vulnerable people through climate and disaster risk finance and insurance solutions. The BMZ has committed some 800 million euros for the InsuResilience Global Partnership and its precursor, the G7 InsuResilience Initiative, since 2015. This year, GIIF received an additional 10 million euros from Germany for the Africa Inclusive Insurance Program.

What are your views on the most recent COP26 summit, especially in comparison to the discussions at the last COP25?

Overall, progress has been made at COP26 in Glasgow – both in terms of negotiations and through policy and financial commitments. Still, much more needs to be done to limit global warming to 1.5°C and to support developing countries in their efforts towards climate neutrality and resilience to climate impacts. And it needs to be done fast, as time is running out. The finalisation of the Paris Rulebook is a substantial achievement and will help to deliver the necessary climate action. This includes article 6, which establishes a robust framework for countries to exchange carbon credits while avoiding double-counting. In addition, more progressive language on climate finance, adaptation and loss and damage has been introduced in the Glasgow Climate Pact. A commitment to double collective adaptation finance was among the outcomes. Last but not least, I was delighted to see the great interest in the InsuResilience Global Partnership’s work on scaling-up climate and disaster risk finance and insurance solutions.

Considering the effects of the ongoing COVID-19 pandemic, what are the main priority areas for the BMZ towards the development of local insurance markets to offer financial protection and resilience building in vulnerable communities?

One important building block is to further strengthen cooperation with the private sector. On the one hand, we want to mobilize the expertise of the international insurance industry and to leverage private capital for climate risk insurance solutions. On the other hand and most importantly, our aim is to strengthen local companies and local expertise in developing climate risk insurance products. To ensure that vulnerable communities are financially protected, all products need to be developed with a pro-poor and gender focus, aligned with the guidance established through the InsuResilience Global Partnership - the Pro-Poor Principles and the declaration on gender-smart solutions. In addition, developing sustainable local insurance markets is key. Here, adequate regulation, capacity building and setting incentives is an important element. To allow partners to test and learn about an insurance product, we are offering premium support – which is gaining particular importance in the current context of the COVID-19 pandemic. This allows risk pools and other climate risk insurance solutions to offer products that are better tailored to customer needs and to diversify their customer and product base. This in turn, facilitates lower reinsurance and premium rates in the long term and helps to make risk pools and other climate and disaster risk finance and insurance solutions more sustainable. The InsuResilience Principles for SMART Premium and Capital Support provide a common understanding on how to implement premium support. All InsuResilience programmes supported by us are required to adhere to these Principles.

In your opinion, what are the main components of sustainable, affordable and effective insurance solutions for poor and vulnerable populations? What kind of support do you provide to your partner countries and programs in this respect?

Insurance cannot be a standalone solution when seeking to manage the impact of climate change. It needs to be part of a comprehensive disaster risk management strategy. The starting point for such a strategy needs to be a climate risk analysis that enables partner countries to identify the most appropriate solutions, starting with adaptation action. In line with a risk-layering approach, climate risks can be distinguished by their frequency and intensity. For climate risks that emerge with high frequency but low intensity, an instrument such as a contingency reserve in the national budget is most appropriate. For risks that occur less often but with a high impact, insurance solutions are normally better suited.

In this context, we support solutions that are tailored to the specific context, targeting poor and vulnerable people in particular. And that is not the end of the job, because it is also necessary to ensure that this target group is familiar with the concept of insurance and the insurance market. This is a complex process that requires time and perseverance. Under the umbrella of the InsuResilience Global Partnership, the BMZ supports various solutions on the micro, the meso and the macro level. At the micro level, for example, the Global Index Insurance Facility plays an important role, and we value the strong partnership we have built. At the meso level, the Natural Disaster Fund, for instance, supports product development and the market introduction of risk financing solutions for intermediaries such as cities, humanitarian actors and businesses. At the macro level, we focus strongly on regional risk pools, including the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Facility, and the Pacific Catastrophe Risk Insurance Company.

Could you please update us on the latest developments in the InsuResilience Global Partnership and what actions are planned for 2022 to make progress towards the InsuResilience Vision 2025?

InsuResilience currently has more than 110 members. Recently, we welcomed Bangladesh, the United States and UNDRR into the partnership. The Partnership’s achievements in 2021 are the outcome of our close collaboration with the V20, the group of finance ministers of 48 vulnerable countries, the private sector, academia, civil society, and multilateral organisations. To date, 22 InsuResilience programmes are active with over 200 projects in more than 100 countries.

In October, the Partnership's highest steering body, the High-Level Consultative Group which is co-chaired by the Marshall Islands and Germany, approved the Principles for SMART Premium and Capital Support. In addition, the group set the enhancement of the global architecture for climate and disaster risk finance and insurance as the strategic theme for 2022. At COP26, the BMZ presented a study on loss and damage by the OECD that recommended strengthening such a global architecture.

Also at COP26, InsuResilience launched the Evidence Roadmap, which sets out the key questions for more and better climate and disaster risk finance and insurance to gather sound evidence on what works. And they launched the Centre of Excellence on Gender-smart Solutions with support from Canada, a unique knowledge-sharing platform to guide practitioners and policymakers on innovative gender-transformative action.

With a big Thank You to Antje Kaestner (Senior Policy Officer at the German Federal Ministry for Economic Cooperation and Development) and Martin Kipping (Head of Climate Policy Division at the German Federal Ministry for Economic Cooperation and Development) who made this interview for the GIIF Newsletter - COP26 Special Edition possible.