Canada is the latest country to announce a new contribution to climate risk insurance initiatives, aiming to increase insurance penetration and narrow the protection gap, at the Paris COP21 climate change conference.
Catherine McKenna, Canada’s Minister of Environment and Climate Change, announced an investment of Can$50 million at COP21 on Saturday.
The investment is to be contributed to the G7 Initiative on Climate Risk Insurance, which is the initiative launched to help another 400 million people gain access to climate risk or disaster insurance by 2020.
This initiative promises to dramatically increase the uptake of climate and weather risk insurance around the world, which will require significant reinsurance support as it scales out in years to come.
Through the investment, Canada wants to help those in developing economies and countries to become better protected against the economic or financial consequences of more intense and increasingly frequent natural catastrophes, such as from severe flooding, droughts and major storms.
“The risks and costs of climate change on developing countries are very significant and Canada is proud to do its part in providing greater access to insurance,” commented Catherine McKenna, Minister of Environment and Climate Change.
Marie-Claude Bibeau, Minister of International Development and La Francophonie, added; “Developing countries are the most affected by climate change. Canada is committed to supporting the poorest and most vulnerable countries to adapt to the adverse effects of climate change, including by using innovative mechanisms like climate risk insurance.”
Canada recognises the importance of climate risk insurance, in helping those most affected by severe climate and weather disasters to cover at least a portion of the economic impact from these risks.
Canada hopes its contribution to the G7 Initiative on Climate Risk Insurance will help to “stimulate greater coverage of effective climate risk insurance markets in countries that are the most vulnerable to natural disaster.”
The contribution from Canada comes on the heels of a $30 million commitment from President Obama which is to be used to support the Caribbean Catastrophe Risk Insurance Facility (CCRIF), the Pacific Catastrophic Risk Assessment and Financing Initiative (PCRAFI) and the African Risk Capacity (ARC).
Canada has also been a supporter of the CCRIF, having provided $25 million to it from 2007-2012 and been its largest contributor.
This support and the contributions are essential if the goal of insuring an additional 400 million people against climate and weather risks by 2020 are to be met. However the capacity required to support this goal is much deeper and this is where the reinsurance market and also provides of alternative reinsurance capital could get a chance to assist as these efforts ramp up.
Read our series of articles focused on the insurance protection gap – under-insurance in emerging and developing economies, the gap between economic and insurance losses, and transferring risk from public sector to private – the opportunity that is on every reinsurance CEO’s lips and which presents the largest opportunity to put excess risk transfer capital to use, requiring both traditional and capital markets support.