G20 Ministers call for disaster risk reduction (DRR), parametric insurance, cat bonds

Ministers from the G20, or Group of Twenty recently came together in Johannesburg, South Africa to address major global challenges and ways to promote sustainability, with members underscoring the importance of investing in building sustainable resilience through the use of disaster risk reduction (DRR) tools such as catastrophe bonds and parametric insurance.

For those unaware, the G20 or Group of 20 is an intergovernmental forum comprised of 19 sovereign countries, the European Union (EU), and the African Union (AU).

It works to address major issues related to the global economy, such as international financial stability, climate change mitigation and sustainable development, through a series of annual meetings of heads of state and heads of government.

Recognising their shared commitment to DRR, in a statement the Ministers of G20 nations that make up the working group underscored, “the importance of investing in building sustainable resilience, prioritising prevention and taking anticipatory action, rooted in evidence-based policy making.”

“This can include the expansion and greater use of affordable, inclusive and accessible pre-arranged financing mechanisms, to strengthen ex-ante disaster risk reduction and preparedness for timely, flexible, effective, comprehensive and equitable disaster response and recovery while placing people’s lives and livelihoods at the core.”

Most relevant to our readership, is the encouragement from the Ministers to finance DRR instruments such as parametric insurance, risk pools, contingent credit, catastrophe bonds, and insurance guarantee facilities. These measures will assist these countries in developing sustainable resilience in the face of severe events.

Ministers also emphasized the importance of strengthening disaster resilience and response within countries that are prone to natural catastrophe events.

“We recognise that disasters and shocks, which are increasing in frequency, intensity and geographic extent, hinder progress towards sustainable development and strain both national capabilities and the international system’s ability to respond, whether the risks are induced by natural hazards, human-made or exacerbated by climate change,” the statement reads.

Ministers particularly highlight the need to pay extra attention to Small Island Developing States (SIDS) and Least Developed Countries (LDCs), those of which are disproportionately impacted by disasters, and cannot afford the costs of adaptation, disaster mitigation, preparedness and recovery in particular.

“We underscore the importance of integrated, inclusive, people-centred and comprehensive approaches to disaster risk reduction. We note the need for strengthened disaster resilience and response, including taking coordinated action to reduce the incidence and negative impacts of disasters, including earthquakes, extreme heat, floods, droughts and wildfires, desertification, and ensure our readiness to help each other, and partners, when needed,” the Ministers continued.

“We therefore encourage the global community, including donors, international financial institutions, development banks and the private sector, to address post-disaster recovery and reconstruction and adaptation, disaster mitigation, preparedness and rebuilding measures. This should be done in ways that promote sustainable resilience, particularly for developing countries and those most vulnerable, respecting their national circumstances and priorities.”

With increasing large-scale disasters disproportionately affecting people, communities and businesses in vulnerable situations in ways that exacerbate poverty and inequality, especially for low-income groups, Ministers highlight the need for efforts to be geared towards addressing inequalities and reducing vulnerabilities.

“We also note that developing countries require an enhanced provision of means of implementation, including adequate, sustainable and timely resources, through international cooperation and global partnerships for development, and continued international support, to strengthen their efforts to reduce disaster risk. We welcome nature-based solutions and ecosystem-based approaches as measures to minimise risk and build resilience to certain hazards while providing ecosystem services,” the statement reads.

Lastly, the Ministers acknowledge recommendations from the 2025 G20 Presidency and the Sustainable Finance Working Group (SFWG) Co-Chairs’ Sustainable Finance report on addressing natural catastrophe insurance protection gaps and integrating adaptation and resilience considerations into the voluntary transition plans of financial institutions and corporations.

“We acknowledge the G20 members’ efforts to continue the overall implementation of the G20 Sustainable Finance Roadmap as a multi-year, action-oriented document, which is voluntary and flexible in nature.”