Mobilizing Insurance for Those on the Climate Crisis Frontline
Summary
In 2024, Humanity Insured committed to making insurance protection available at scale to communities at the greatest risk of climate-induced poverty. By collaborating with insurance, philanthropy, and other private sector industries to leverage $1 billion of insurance capabilities, this initiative aims to reach 5 million people by 2030. Humanity Insured will normalize the use of philanthropic capital to finance insurance solutions that build the climate and financial resilience of frontline communities. It will fund climate modeling and analytic activities that enable these communities to understand the climate risks they face and help inform decisions on how to best adapt and prepare. It will mobilize philanthropic and private sector capital to subsidize the cost of fit-for-purpose climate insurance solutions that prepare and protect communities. Alongside this insurance protection, it will fund access to resilience building assets or training that reduce climate-related impacts on livelihoods.
Approach
In 2024, Humanity Insured commits to collaborating with insurance, philanthropy, and other private sector industries to leverage $1 billion of insurance capabilities by 2030 for 5 million people on the climate-crisis frontline.
These communities are primarily excluded from the insurance market because the products and solutions are too expensive and not designed for the specific climate risks and impacts local communities are facing. Humanity Insured will address these market failures by making climate insurance available and affordable at scale for the first time to communities at the greatest risk of climate-induced poverty in Latin America, Africa, and Asia. It will do this by subsidizing the cost of the insurance premium and influencing the insurance market to create community-led solutions, specifically:
Funding climate modelling and analytics that enable communities to understand the climate risks they face. This access to information will inform decisions on how communities can best adapt and prepare.
Mobilizing philanthropic and private sector capital to subsidize the cost of fit-for-purpose climate insurance solutions that prepare and protect communities. Partners will create capital pools that provide guaranteed payments to communities when a pre-agreed climate event happens.
Funding, alongside the insurance protection, a community’s access to resilience building assets or training that reduce climate-related impacts on livelihoods.
Creating collaborative funding opportunities that provide protection to more people.As Humanity Insured is incubated by Howden Group and seed funded by the insurance sector, the effort will provide access to the insurance industry and expertise. Partnerships will leverage networks to maximize the value of capital mobilised and the impact of capital deployed. They will deliver one or more of the following:
Financial resources; Networks and relationships of trust with potential funders; Trust within the communities Humanity Insured works with; Skills and technical expertise; Project origination and implementation; and Awareness building.
Action Plan
April – September 2024
Setting clear goals and strong foundations by creating a brand, identifying priority countries and establishing strong relationships with partners. Includes creation of the Founding Partners Circle and engaging with climate frontline communities and local insurance markets. First projects funded.
Impact: $2,000,000 of capital mobilized, thereby leveraging $50,000,000 of insurance capabilities across 10 projects, protecting 630,000 people.
October 2024 – September 2026
Focus on building networks, knowledge, and credibility. Increasing the number of projects supported annually to create a track record that demonstrates the impact of insurance in building climate resilience. Continued relationship development with core funding partners to develop a pipeline of multi-year funders. Identification of larger projects with a wider reach and scaling of existing projects. Partners will amplify the brand and communicate Humanity Insured’s message more broadly on different platforms.
Impact: $5,000,000 of capital mobilized, thereby leveraging $250,000,000 of insurance capabilities across 25 projects, protecting 3,125,0000 people.
October 2026 – September 2029
Focus on scaling projects and increasing the number of co-created new initiatives with partners to make insurance widely accessible and affordable for climate frontline communities by normalizing the use of private, philanthropic and public sector capital to fund fit-for-purpose insurance products. Collaboration with one or more partners to co-create and co-invest in new multi-year initiatives, with shared decision making, resources, reporting and program management.
Impact: $10,000,000 of capital mobilized, thereby leveraging $1,000,000,000 of insurance capabilities across 40 projects, protecting 5,000,000 people.
It is anticipated that the limit value for each insurance policy Humanity Insured subsidizes will increase over the course of the 5-year period. This means that a greater sum of insurance capabilities may be leveraged per project resulting in more people being protected.
Background
Climate change disproportionately impacts the c.3.6 billion people who make-up the poorest and most at-risk communities. The costs associated with climate risks for these communities are projected to escalate steeply in the coming decades. By 2030 the impacts of climate change are estimated to cost developing countries between US $290 billion and US $580 billion annually, rising to between US$1,132 billion and US$1,741 billion by 2050 (R. Mechler, L.M. Bouwer, T. Schinko, S. Surminski, J. Linnerooth-Bayer (eds.) , Loss and Damage from Climate Change: Concepts, Methods and Policy Options, 2019) .
The livelihoods of many in these countries are highly reliant on, and vulnerable to climate shocks. Yet the anticipatory risk-transfer and financial preparedness tools that are commonly used in developed markets, most notably insurance, remain out of reach for these communities. While 35% of the natural catastrophe-related losses globally over the last decade were insured, the figure for developing countries was less than 10% or even close to zero (Munich Re, Natural disaster risks – Rising trend in losses) .
Providing insurance for these communities is crucial for both financial stability and well-being. It ensures quick recovery after disasters, reduces financial hardships, and promotes resilience (University of Cambridge Institute for Sustainability Leadership, Mutual microinsurance and sustainable development, 2016) . Without insurance, these communities remain trapped in a cycle of poverty, unable to rebuild and recover effectively after climate-induced disasters. The absence of insurance exacerbates economic instability and vulnerability, making it difficult for these populations to achieve long-term development and progress.
This fundamental imbalance demands a solution whereby underserved populations are empowered to access the financial safety nets that make preparedness and resilience possible. This commitment seeks to make this happen.
Progress Update
Partnership Opportunities
Humanity Insured is seeking the following resources and services to complete and scale this commitment:
Financial Resources: Whilst Humanity Insured has secured some financial backing from the insurance sector, in order to truly transform the system and stop climate as a driver of poverty at scale, it needs to unlock additional financial resources from the private sector and philanthropy.
Implementing Partners: Humanity Insured needs to identify enough implementation partners that firstly, can help source sufficient projects that require a total of $1 billion of insurance capacity; and secondly, can help scale projects year on year to cover more regions and more climate perils, thereby protecting more people.
Media Support: To raise awareness of this commitment and bring on board additional partners to collaborate, Humanity Insured is seeking positioning partners to help grow knowledge of the initiative and its impact., As part of its commitment, Humanity Insured offers other organizations the following resources and services:
Financial Resources: Humanity Insured will provide grants to implementing partners to enable them to access the insurance tools and expertise required to build resilience. As Humanity Insure is being incubated by Howden, all its operational costs are covered, and all capital mobilized goes towards its key activities and projects.
Implementing Partners: Through its funder collaboratives and co-creation of multi-year initiatives, Humanity Insured will amplify the work of local implementation partners to a greater pool of funders and build a network of organizations interested in using insurance to push humanitarian agendas and as a development tool.
Topic Expertise: As Humanity Insured is incubated by Howden and the insurance market is backing the initiative, implementing partners will have access to insurance professionals who are experts in developing index-based insurance products and assessing and addressing climate risk.