Howden highlighted the industry's role in measuring and safeguarding against risks, supporting investment in the future. Referring to discussions at COP26 and COP27, including the landmark agreement on loss and damage, Howden emphasised the need to leverage private sector capabilities to protect and invest in vulnerable countries.
“For some reason, there seems to be a belief that the climate risks for vulnerable countries in the Global South are uninsurable. The problem isn’t that they’re uninsurable, it’s that there has been nobody to pay the premium at the scale required,” he said.
The Loss and Damage fund, according to Howden, has the potential to change this dynamic. Reflecting on COP27, Howden mentioned his initiative to model the risks faced by these countries and calculate the protection needed. This led to collaboration with Cambridge University to conduct research, focusing on losses as a percentage of GDP. This approach shifts the focus from protecting physical assets to safeguarding entire economies.
“These are two sides of a very powerful coin: guaranteed, pre-agreed finance to respond when a disaster hits – or indeed even before – and the certainty needed to make vulnerable countries more investable,” Howden said.
“What do I mean by that – if you know as a country, business person or a smaller farmer, you have the finance to protect what is lost or damaged you can more easily attract investment,” he said.
The research indicated that the smallest, most vulnerable countries face the risk of losing over 100% of their GDP due to extreme climate shocks. Howden proposed a solution to cap this loss at 10% of GDP, costing significantly less than anticipated. He explained that US$1 billion, less than 1% of the targeted US$100 billion Loss and Damage fund, could secure around US$75 billion of protection and could be scaled to protect all 100 L&D recipient countries.
Howden also emphasised the efficiency and non-political nature of this approach, highlighting its potential to provide guaranteed funds irrespective of media attention. He cited the example of Pakistan's floods, where pledged international donor funds have been delayed, suggesting that pre-agreed finance would have been more efficient.
“In a world that is more volatile than ever, you can’t put a price on certainty. The poorest and most vulnerable have no safety net. For billions of people, if their home or land is wiped out that means nowhere to live and no income. Pre-arranged finance not only provides the opportunity to rebuild after a disaster has happened. By reducing vulnerability, it also provides families, communities, governments, and investors with the confidence to invest in the future,” he said.
Concluding his address, Howden presented three calls to action: collaboration with climate-vulnerable countries to turn this concept into reality, private sector support to make these countries more investable, and donor country backing to initiate the process. He expressed hope that this initiative could transform resilience building against climate change impacts, setting a significant precedent for COP28.
As part of its programs to address climate risks, the insurance group also recently introduced Howden Climate Parametrics, a global initiative that melds (re)insurance, climate, and data expertise.
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