The Role of GIIF and BMZ in Addressing Climate Change and Food Insecurity

Sebastian Lesch

In an era marked by escalating climate challenges and food insecurity, the need for innovative insurance solutions has never been more pressing. This blog features an insightful interview with Sebastian Lesch, Head of the Climate Policy Division at the German Federal Ministry for Economic Cooperation and Development, exploring the pivotal role of the World Bank Group's Global Index Insurance Facility (GIIF) in promoting inclusive insurance over the next decade. It delves into strategies for integrating the private sector into climate resilience efforts and highlights key focus areas for fostering collaboration among stakeholders. With a particular emphasis on supporting vulnerable populations, especially women and girls, this discussion underscores the critical success factors and priority actions required to develop sustainable solutions to climate change. Join us as we unpack the insights from this important dialogue with Sebastian Lesch.

In light of the increasing challenges posed by climate change and food insecurity, what role do you envision for the World Bank Group, mainly for GIIF, in promoting inclusive insurance over the next 5 to 10 years?

Over the next years, the World Bank Group and particularly GIIF will play a decisive role for better integrating the private sector, specifically the insurance industry, into programming and implementation of projects. We envision that with GIIF’s focus on capacity building and on improving the regulatory environment in target countries, the facility will be a cornerstone for building trust between governments and the private sector. This is essential for our ambition to ensure that affordable and meaningful insurance products are provided under market-driven conditions to reduce the protection gap for climate-induced losses. Additionally, we would like to see GIIF build understanding and acceptance among potential policyholders, especially within vulnerable populations, and increase confidence in private-sector solutions.

Given BMZ’s comprehensive understanding of the global social and economic landscape, what key focus areas should be prioritized to foster collaboration among various stakeholders?

To foster collaboration among stakeholders, we need to make progress when it comes to the inclusion of the private sector, both on the level of global public-private partnerships, and on country level, where the local insurance sector will become more important in the future. The example of the Global Shield against Climate Risks exemplifies how we can drive this ambition forward and eventually, more Least Developed Countries (LDCs) and Small Island Developing States (SIDS) should gain the opportunity to develop an insurance industry. In these countries, a key priority should be the target group of BMZ: the poor and particularly vulnerable populations. An important concern is to improve the situation of women and girls, ensuring that their specific needs are adequately addressed in all efforts to enhance collaboration and foster sustainable development outcomes. With regards to the target group of particularly poor individuals, measures aimed at financial literacy could also be considered, helping people understand the purpose and functioning of insurance products. This would enable them to better assess the benefits and processes involved in obtaining insurance.

Considering BMZ’s longstanding commitment to developing innovative and sustainable solutions in response to climate change, what do you believe are the critical success factors, key lessons learned, and priority actions for the future?

In response to BMZ's commitment to address the effects of climate change, the critical success factors lie in building trust that climate risk insurance products will deliver swiftly and efficiently in the event of a disaster. This is particularly crucial as the frequency and intensity of extreme weather events are expected to increase. Ensuring that vulnerable populations in partner countries are better insured against these risks is a priority for BMZ.
A key lesson learned is that public budgets alone cannot address the full scope of climate change impacts. Therefore, involving the private insurance sector is indispensable to respond to increasing costs and multiplying risks. This requires robust partnerships between governments, the insurance industry, and the insured, underlining a collaborative approach to managing and mitigating climate-related risks. For the future, BMZ's priority actions include strengthening these partnerships to enhance the reach and effectiveness of insurance solutions, while ensuring that products are tailored to meet the specific needs of the most vulnerable, particularly in developing countries.