loss and damage

COP 29, the United Nations Climate Change Conference held in Baku, Azerbaijan, has drawn to a close with agreement on certain areas and progress being made on the much-discussed Loss and Damage, as well as the Global Shield, two programs of some relevance to insurance, reinsurance and insurance-linked securities (ILS) markets.

In a perhaps surprising turn of events, the opening hours of the COP28 climate talks today have seen a landmark agreement to operationalise and provide initial funding for the much-discussed loss and damage fund, that is designed to help the countries that are most vulnerable to the adverse effects of climate change.

A new report calls on the world to implement risk sharing systems, such as parametric triggers in insurance, reinsurance and insurance-linked securities (ILS) such as catastrophe bonds, as a central pillar of the Loss and Damage architecture required to protect the most vulnerable nations against climate, weather and natural disasters.

After extended last minute negotiations, an agreement has been reached on forming a loss and damage fund at the COP27 climate change conference in Egypt, but the details will matter as to how this important climate risk financing initiative comes together and the role of risk transfer markets in supporting it.