IDF to set out plans for infrastructure fund at COP28
Plans for an industry-backed infrastructure debt fund to provide adaptation finance for low-income countries are set to be unveiled by the Insurance Development Forum (IDF) at the upcoming COP28 talks, ESG Insurer understands.
Details of the planned fund, which is expected to target funding in the hundreds of millions of dollars, are set to be unveiled during discussions at the conference in Dubai, which begins on 30 November.
The move is part of a drive to shift towards pre-arranged financing for adaptation management rather than reliance on after-the-event disaster relief funding.
Kipkorir Koskei, director for strategic partnerships and policy at the IDF, said the industry-backed body was working to encourage a shift in how donors fund humanitarian aid.
“Only 1.5 percent of funding is currently pre-arranged. If we can move that to 5 or 10 percent, that would make a significant difference,” he said.
One of the key challenges is to generate funding for slow-onset impacts of climate change. A report released by the Centre for Disaster Protection and UK Aid ahead of COP28 has highlighted the limited impact of current pre-arranged finance tools, including insurance, in addressing slow-onset impacts, particularly in low-income countries.
As an example, just 0.6 percent of the $4bn+ distributed through the World Bank’s Catastrophe Deferred Drawdown Options since 2009 have been for slow-onset events such as drought.
Partnering in wider climate dialogue
Having unveiled a series of initiatives over the previous two COP events, Koskei told ESG Insurer much of the IDF’s focus at this year’s event will be on serving as a partner in the wider climate dialogue.
“Projects we announced last year are up and running globally now – the question is how we embed these and increase trust in the role the insurance community can play in addressing these challenges,” he said.
These initiatives include the Global Risk Modelling Alliance, a public-private partnership established to help countries better understand the risks they face to enable them to make more informed decisions around resilience and disaster risk reduction measures.
“If we can get analytics embedded within a few countries, this will hopefully encourage them to better understand the value of insurance,” he said.
Over the past year, he said the IDF had been working with the governments of Uzbekistan, Ghana and Costa Rica – none of which had previously engaged with insurance on a practical basis.
“The foundations have been built but the challenge is how we move from product design to active coverage.”
He said support for the cost of premiums remains “one of the biggest elephants in the room”.
“But if we can get more countries buying into the idea of insurance that will be game changing, and we have a potential window open for premium financing within the Global Shield, announced last year.”
He said the IDF was also working with the World Bank on a programme bringing together the industry’s capabilities as part of a “knowledge exchange”, which would in turn enable the industry to demonstrate its tools to the Bank’s clients.
IDF secretary general Ekhosuehi Iyahen said it was critical to communicate the value of insurance to the wider community to help tackle these challenges.
“This will require doubling down our efforts to build trust and demonstrate value. We are witnessing a shift in the development discourse and the convergence within the development and humanitarian communities on the importance and relevance of risk management and the role of insurance,” she said in her keynote address to this month’s Resilience and Adaptation Summit, hosted by Better Insurance Network.
Iyahen called for all actors within the risk-sharing domain – both tax and premium based, ranging from community programmes to multinational level – to be integrated in a “public-private mutual risk sharing container”.
“In today’s societies that face industrial and environmental shocks it is going to be necessary to update the landscape of public, private, mutual and social protection systems to support populations against a wide range of extreme social, environmental and economic risks,” she said.
“Public, private and mutual corporate expertise and capital should be applied to develop optimum levels of alignment and risk-sharing at local, regional and global scales. It's a massive opportunity, but requires new public-private sector compacts globally, as well as nationally.”