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WEDNESDAY, JULY 09, 2025
Climate insurance a shield against uncertainties

Corporates

Press Release
26 November, 2024, 02:25 pm
Last modified: 26 November, 2024, 02:28 pm

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Climate insurance a shield against uncertainties

Press Release
26 November, 2024, 02:25 pm
Last modified: 26 November, 2024, 02:28 pm
Climate insurance a shield against uncertainties

Climate insurance becomes crucial for protecting vulnerable communities and economies as climate change intensifies global weather extremes.

This innovative financial mechanism helps nations and individuals recover from climate-related disasters, from floods to droughts.

According to data from Munich Re, the world's largest reinsurer, the total economic losses from natural disasters in 2023 amounted to approximately US$250 billion. The private insurance market and public insurance entities covered an estimated US$120 billion of that year's total economic loss. This marks the fourth consecutive year nominal insured losses have topped US$100 billion and the sixth year out of the last seven. This is a new normal.

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Climate insurance has evolved into a robust international safety net, with multiple programs protecting vulnerable regions. The Caribbean and Pacific islands lead the way through their innovative insurance facilities - CCRIF and PCRAFI - which provide swift financial aid after natural disasters. The World Bank's Global Index Insurance Facility protects small-scale farmers and entrepreneurs against climate catastrophes in developing nations. A groundbreaking initiative, Insu Resilience, now unites significant powers like Germany and the UK with the World Bank and dozens of partners. This partnership, jointly led by the V20 and G20 nations, aims to revolutionise climate risk protection in developing countries by expanding insurance markets and implementing intelligent risk management solutions.

Bangladesh is among the world's most climate-vulnerable nations, with devastating cyclones, floods, and rising seas threatening its coastal regions and farming communities. JICA research reveals the country absorbed over US$15 billion in natural disaster losses in recent decades, with annual climate-related damages projected at US$3.2 billion—a staggering 2.2% of GDP.

The government is taking steps to strengthen financial resilience. New programs like Weather Index-Based Crop Insurance protect farmers against extreme weather losses. The country's robust disaster management framework will soon incorporate a national risk financing strategy in its upcoming disaster management policy and ninth five-year plan.

Yet significant hurdles remain. The Draft National Disaster Risk Financing Strategy reveals insurance penetration at just 0.5% of GDP, far below the 3.7% Emerging Asia average. For many impoverished Bangladeshis, insurance premiums remain out of reach without government or donor backing. Technical challenges, including complex risk modelling and data gaps, further complicate efforts to expand coverage.

Looking ahead, experts advocate for innovative solutions like parametric insurance products and public-private partnerships to expand coverage. As climate risks escalate, insurance mechanisms must evolve to protect the world's most vulnerable populations while encouraging climate-resilient development practices.

#LGED / #tbs / #corporate

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