SlideShare a Scribd company logo

CISL: Executive Summary Risk Sharing for Loss and Damage

Energy for One World
Energy for One World
Energy for One WorldFounder of Energy For One World at Energy for One World

Publication by University of Cambridge CISL November 2023

CISL: Executive Summary Risk Sharing for Loss and Damage

1 of 4
Download to read offline
Risk Sharing for
Loss and Damage
Scaling up protection
for the Global South
Authors
Lead author:
Dr Ana Gonzalez Pelaez,
Fellow, CISL
Co-authors:
Dr James Daniell, Natural
Hazards Engineer, Center for
Disaster Management and
Risk Reduction Technology
(CEDIM) at Karlsruhe Institute
of Technology and the
University of Adelaide, and
CEO, Risklayer
Rowan Douglas, Chair,
Operating Committee,
Insurance Development Forum
Charles Langdale, Chair,
Climate Risk and Resilience,
Howden Group
Adarsh Narayanan Krishnan,
Analyst, Climate Parametrics
Practice, Howden Group
CISL team:
Sid Miller, Director, ClimateWise
Natalie Thompson, Senior
Project Manager,
ClimateWise
Dr Nina Seega, Director,
Centre for Sustainable Finance  
Laura Deltenre, Senior Project
Manager, ClimateWise
Dr Mohsen Gul,
Senior Project Manager,
Banking Environment Initiative
Adele Williams, Director,
Communications
Asha Tharoor,
Media Consultant,
Communications
Maisie Ormrod,
Communications Manager,
Communications
Emily Hamm,
Project Co-ordinator,
Centre for Sustainable Finance
Tom Yorke, Design &
Brand Manager
Laura Cochrane-Davies, Senior
Communications Manager
Designer: Clair Jackson
Citing this report
University of Cambridge
Institute for Sustainability
Leadership (CISL). (2023).
Risk sharing for Loss and
Damage: Scaling up protection
for the Global South.
Cambridge, UK: University
of Cambridge Institute for
Sustainability Leadership.
Copyright
Copyright © 2023 University
of Cambridge Institute for
Sustainability Leadership
(CISL). Some rights reserved.
The material featured in this
publication is licensed under
the Creative Commons
Attribution-NonCommercial-
ShareAlike 4.0 International
Licence (CC BY-NC-SA 4.0).
The University of Cambridge Institute for
Sustainability Leadership
CISL is an impact-led institute within the University of Cambridge
that activates leadership globally to transform economies for
people, nature and climate. Through its global network and hubs
in Cambridge, Cape Town and Brussels, CISL works with leaders
and innovators across business, finance and government to
accelerate action for a sustainable future. Trusted since 1988 for its
rigour and pioneering commitment to learning and collaboration,
the Institute creates safe spaces to challenge and support those
with the power to act.
Acknowledgements
Advisory Board
Sara Ahmed, Finance Advisor
to the V20
Dr Annette Detken, Head,
Global Shield Solutions
Platform
Jorge Gastelumendi, Director
Global Policy, Atlantic Council
Dr Rashmin Gunasekera,
Senior Disaster Risk
Management Specialist,
World Bank
David Howden, CEO,
Howden Group
Ekhosuehi Iyahen, Secretary
General, Insurance
Development Forum
Jan Kellett, Team Leader
Insurance and Risk Finance
Facility, UNDP
Nick Moody, Co-leader,
Global Risk Modelling Alliance
Justin Mundy, Chair,
SLM Partners
Dr Youssef Nassef, Head of
Adaptation, UNFCCC
Dr Nicola Ranger, Director,
Resilient Planet Finance Lab
Tomas Soley, Chair, IAIS
Financial Inclusion Forum of
insurance regulators
Note: Input and guidance
received from members of
the Advisory Board does not
imply or represent an official
position, opinion, judgement or
endorsement on their part or of
their organisations, CISL, the
wider University of Cambridge
or clients.
Additional Contributions
Climate Champions team:
Sabrina Nagel, David Howlett,
Marcia Toledo Sotillo.
COP28 Presidency:
Christopher Frassetto, Helena
de Jong, Anusha Seshadri.
Howden Group:
Shevon Cartwright,
Matthew Foote, David Flandro,
Rod Fox, Philipp Kusche,
Hayley Langston, Martin Mak,
Amy Parkes, Craig Pettengell,
Kapil Radia, Elliot Richardson,
Tim Ronda, Sophie Sacarello,
Henrietta Southby,
Man Wai Cheung, Lucy Tunkin,
Victoria Waite.
Regional risk pools: Isaac
Anthony (CCRIF SPC),
Malvern Chirume (ARC),
Yoshihiro Kawai (SEADRIF),
Aholotu Palu (PCRIC).
Risklayer, CEDIM and
Institute of Photogrammetry
and Remote Sensing:
Johannes Brand,
Andreas Schaefer.
Various organisations:
Izzy Ashe (FTI Consulting),
Kathy Baughman McLeod
(Climate Resilience For All),
Antoine Bavandi (Gallagher Re.),
Ritu Bharadwaj (IIED),
Rebekah Clement (SMI),
Jamila Elmir (Private Office
H.E. Razan Al Mubarak),
Eduarda Fontes (Insurance
Development Forum),
Celia Gonzalez Haug
(SUGESE), Prof Saleemul Huq
(ICCCAD), Angus Kirk
(Global Parametrics),
Jenty Kirsch-Wood (UNDRR),
Kipkorir Koskei (Insurance
Development Forum),
Alexandra Kriegsheim
(UNFCCC), Panayotis
Koulovasilopoulos (Hiscox),
Nathanial Matthews (Global
Resilience Partnership),
Ivo Menzinger (Swiss Re),
Tom Mitchell (IIED),
Dr Paul Munday (S&P Global
Ratings), Maris Tebecis
(Global Counsel).
Personal thanks to Maren and
Jacob Daniell, Rebecca and
Sergio Douglas-Gonzalez.
This report has been prepared
with the support of Howden.
This briefing offers a breakthrough in the design of the global financial
architecture for Loss and Damage. It demonstrates how the economic efficiency
of risk-sharing systems can convert modest annual financial flows from donors
into major contractual entitlements from the risk capital markets for vulnerable
countries when disasters strike, now and through to 2050.
After 30 years of negotiations, governments agreed at
COP27 to support financially the most climate-vulnerable
developing countries, in the process known as Loss
and Damage (L&D). It was also recognised that L&D will
require multiple, complementary approaches, a “mosaic of
solutions”.1
As part of this mosaic, in August 2023, Small
Island Developing States (SIDS) and Least Developed
Countries (LDCs) identified risk-sharing systems in the
recommendations proposed to operationalise L&D.2
These developments highlight an urgent need to define
how risk-sharing systems can be implemented for L&D,
including the climate risk analysis necessary to inform
funding requirements and access financial markets. This
briefing addresses this gap by analysing a diverse sample
of countries that illustrate approaches relevant to all LDCs,
SIDS and the Vulnerable Twenty (V20). We provide three
new contributions to the design of the global financial
architecture for L&D:
• Quantifying current and future climate risks, across
national economies to 2050, with the methods and
metrics used by risk capital markets, so that climate
financial risks from the Global South can be shared
internationally.
• Quantifying the estimated costs of securing national
economies and designing a strategic vision for
protecting vulnerable countries from the impacts
of climate shocks on their gross domestic product
(GDP). We introduce into L&D the well-established
financial concept of umbrella stop-loss, meaning that
losses above a defined level are protected by pre-
arranged financing.
• Illustrating a first step for implementation of L&D risk-
sharing systems. We evaluate how an initial allocation of
USD 10 million donor funds per country could generate
immediate protection, at scale, through the risk capital
markets.
Key messages
• Risk-sharing systems, supported by donors, that transfer
the financial burdens of climate risks from the Global
South to the international risk capital markets should be a
central pillar of the L&D architecture.
• As an immediate step to establish a L&D global risk-
sharing mechanism, LDCs, V20 and donor-qualifying
SIDS should be allocated USD 10 million annually in
premium support from L&D related funds. Each country
would receive on average USD 200 to 300 million in
pre-arranged annual protection to support their highest
priority needs for more frequent climate shocks: eg
humanitarian response; recovery of schools, hospitals
and critical infrastructure; sovereign debt repayments;
agricultural support; and restoration of marine and
terrestrial ecosystems. Across 100 countries, this would
provide approximately USD 25 billion of pre-arranged
finance for an annual cost of around USD 1 billion.
• Using the economic efficiency of risk-sharing systems
for climate risks, the international community should
commit to an L&D strategic objective of introducing
umbrella stop-loss mechanisms to protect the national
economies of vulnerable countries in the Global South,
with thresholds set at appropriate levels depending on
the size of the economy and levels of risk.
• As an initial umbrella stop-loss commitment, the smallest
and most vulnerable countries, such as those under
one million population, should be protected from
losing more than 10 per cent of their annual GDP
from climate-related events. At present, most of these
countries are at risk of losing more than 100 per cent of
their annual GDP from climate shocks.
• These L&D interventions could be implemented through
existing institutions including national governments,
development institutions, regional risk pools, international
donors and global risk capital markets.
Executive Summary
4
Additional findings for
V20 Small Island Developing
States (SIDS)
The analytical part of this study has been carried out on a
group of 11 V20 SIDS, with populations under one million,
representing very different geographies, economies and
perils. Key findings:
• These SIDS now face foreseeable losses of between
50 per cent and over 100 per cent of GDP from
extreme climate events, such as severe droughts,
tropical cyclones and floods. With climate change, these
risks are set to grow between 10 and 15 per cent by
2050, approximately 0.5 per cent per year. This is an
intolerable burden of financial risk to achieve sustainable
development, prosperity and security. Such extreme
events can strike tomorrow and the SIDS are currently
bearing these risks.
• Overall economic losses from climate shocks to the 11
SIDS in this study could be limited to a maximum of 10
per cent of GDP equivalent per year, with approximately
USD 300 million annually from L&D donors to unlock
contractual entitlements of up to USD 25 billion across
these countries from the risk capital markets. This would
cover a large range of risks, from the more frequent
events (eg 5 per cent annual probability) to the most
extreme shocks (0.1 per cent annual probability). The
umbrella stop-loss would be achieved through a range of
parametric programmes with specific hazard triggers for
defined climate-related events which would contribute to
losses equivalent to more than 10 per cent of GDP
.
• As a first step, this study shows that USD 10 million of
annual pure premium (price of risk without additional
defined expenses) per SIDS could generate an average
annual protection of approximately USD 250 million per
country, from more frequent risks (more than USD 2.5
billion across the 11 countries).
• Despite growing risks from climate change, this study
has revealed that the economies of these countries
remain insurable to 2050, while displaying some of the
highest annual average losses in the world.3,4
The viability
of pre-arranged protection gives these SIDS more time to
adapt and reduce vulnerabilities, greater financial security
to prosper and quantified knowledge to make more
informed decisions for resilient development.
• A geographically diverse L&D umbrella facility for the
economies of these countries, implemented through the
regional risk pools, would create a large, diversified
portfolio to unlock the global risk capital markets at the
lowest price for donors.
Risk Sharing for Loss and Damage
5

More Related Content

Similar to CISL: Executive Summary Risk Sharing for Loss and Damage

Buliding-Financial-Resilience-to climate-Impacts.pdf
Buliding-Financial-Resilience-to climate-Impacts.pdfBuliding-Financial-Resilience-to climate-Impacts.pdf
Buliding-Financial-Resilience-to climate-Impacts.pdfOECD Governance
 
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...'Swiss Re global partnerships: innovative insurance solutions for sovereign r...
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...UNDP Climate
 
Basics of disaster risk management
Basics of disaster risk managementBasics of disaster risk management
Basics of disaster risk managementPradeep Panda
 
Financial Innovations and Market Mechanisms for Coping with Climate Change
Financial Innovations and Market Mechanisms for Coping with Climate ChangeFinancial Innovations and Market Mechanisms for Coping with Climate Change
Financial Innovations and Market Mechanisms for Coping with Climate ChangePrabhakar SVRK
 
109 envisioning resilience towards ccd
109 envisioning resilience towards ccd109 envisioning resilience towards ccd
109 envisioning resilience towards ccdMegh Rai
 
A Green Transition That Leaves No One Behind.pdf
A Green Transition That Leaves No One Behind.pdfA Green Transition That Leaves No One Behind.pdf
A Green Transition That Leaves No One Behind.pdfEnergy for One World
 
Concern_Universal_DRR_policy_note_V1.1_oct10
Concern_Universal_DRR_policy_note_V1.1_oct10Concern_Universal_DRR_policy_note_V1.1_oct10
Concern_Universal_DRR_policy_note_V1.1_oct10James Treasure-Evans
 
Climate Summit Action Areas Resilience
Climate Summit Action Areas ResilienceClimate Summit Action Areas Resilience
Climate Summit Action Areas ResilienceDr Lendy Spires
 
UNEP Report: State of Finance for Nature
UNEP Report: State of Finance for NatureUNEP Report: State of Finance for Nature
UNEP Report: State of Finance for NatureEnergy for One World
 
Disaster Management Systems: Building Capacity for Developing Countries and ...
Disaster Management Systems: Building Capacity  for Developing Countries and ...Disaster Management Systems: Building Capacity  for Developing Countries and ...
Disaster Management Systems: Building Capacity for Developing Countries and ...Connie White
 
1   Disaster Management, Developing Country Comm.docx
1   Disaster Management, Developing Country Comm.docx1   Disaster Management, Developing Country Comm.docx
1   Disaster Management, Developing Country Comm.docxfelicidaddinwoodie
 
'Financing climate change risks - increasing financial certainty in the face ...
'Financing climate change risks - increasing financial certainty in the face ...'Financing climate change risks - increasing financial certainty in the face ...
'Financing climate change risks - increasing financial certainty in the face ...UNDP Climate
 
Final_CDRFinSIDs_20161104_webversion
Final_CDRFinSIDs_20161104_webversionFinal_CDRFinSIDs_20161104_webversion
Final_CDRFinSIDs_20161104_webversionRebecca Soares
 

Similar to CISL: Executive Summary Risk Sharing for Loss and Damage (20)

2016 Resilience Insights
2016 Resilience Insights 2016 Resilience Insights
2016 Resilience Insights
 
Buliding-Financial-Resilience-to climate-Impacts.pdf
Buliding-Financial-Resilience-to climate-Impacts.pdfBuliding-Financial-Resilience-to climate-Impacts.pdf
Buliding-Financial-Resilience-to climate-Impacts.pdf
 
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...'Swiss Re global partnerships: innovative insurance solutions for sovereign r...
'Swiss Re global partnerships: innovative insurance solutions for sovereign r...
 
Basics of disaster risk management
Basics of disaster risk managementBasics of disaster risk management
Basics of disaster risk management
 
Financial Innovations and Market Mechanisms for Coping with Climate Change
Financial Innovations and Market Mechanisms for Coping with Climate ChangeFinancial Innovations and Market Mechanisms for Coping with Climate Change
Financial Innovations and Market Mechanisms for Coping with Climate Change
 
109 envisioning resilience towards ccd
109 envisioning resilience towards ccd109 envisioning resilience towards ccd
109 envisioning resilience towards ccd
 
Crafting & Designing Programs by Practitioner's for a Safer Future
Crafting & Designing Programs by Practitioner's for a Safer FutureCrafting & Designing Programs by Practitioner's for a Safer Future
Crafting & Designing Programs by Practitioner's for a Safer Future
 
NCFA_SECO_print
NCFA_SECO_printNCFA_SECO_print
NCFA_SECO_print
 
A Green Transition That Leaves No One Behind.pdf
A Green Transition That Leaves No One Behind.pdfA Green Transition That Leaves No One Behind.pdf
A Green Transition That Leaves No One Behind.pdf
 
Concern_Universal_DRR_policy_note_V1.1_oct10
Concern_Universal_DRR_policy_note_V1.1_oct10Concern_Universal_DRR_policy_note_V1.1_oct10
Concern_Universal_DRR_policy_note_V1.1_oct10
 
Global Risk Report 2007
Global Risk Report 2007Global Risk Report 2007
Global Risk Report 2007
 
Climate Summit Action Areas Resilience
Climate Summit Action Areas ResilienceClimate Summit Action Areas Resilience
Climate Summit Action Areas Resilience
 
UNEP Report: State of Finance for Nature
UNEP Report: State of Finance for NatureUNEP Report: State of Finance for Nature
UNEP Report: State of Finance for Nature
 
United Nations_ State of Finance for Nature in 2022.pdf
United Nations_ State of Finance for Nature in 2022.pdfUnited Nations_ State of Finance for Nature in 2022.pdf
United Nations_ State of Finance for Nature in 2022.pdf
 
Disaster Management Systems: Building Capacity for Developing Countries and ...
Disaster Management Systems: Building Capacity  for Developing Countries and ...Disaster Management Systems: Building Capacity  for Developing Countries and ...
Disaster Management Systems: Building Capacity for Developing Countries and ...
 
VI.1 DAC-EPOC JOINT TASK TEAM ON CLIMATE CHANGE AND DEVELOPMENT CO-OPERATION
VI.1 DAC-EPOC JOINT TASK TEAM ON CLIMATE CHANGE AND DEVELOPMENT CO-OPERATIONVI.1 DAC-EPOC JOINT TASK TEAM ON CLIMATE CHANGE AND DEVELOPMENT CO-OPERATION
VI.1 DAC-EPOC JOINT TASK TEAM ON CLIMATE CHANGE AND DEVELOPMENT CO-OPERATION
 
Wef global risks_report_2014_3
Wef global risks_report_2014_3Wef global risks_report_2014_3
Wef global risks_report_2014_3
 
1   Disaster Management, Developing Country Comm.docx
1   Disaster Management, Developing Country Comm.docx1   Disaster Management, Developing Country Comm.docx
1   Disaster Management, Developing Country Comm.docx
 
'Financing climate change risks - increasing financial certainty in the face ...
'Financing climate change risks - increasing financial certainty in the face ...'Financing climate change risks - increasing financial certainty in the face ...
'Financing climate change risks - increasing financial certainty in the face ...
 
Final_CDRFinSIDs_20161104_webversion
Final_CDRFinSIDs_20161104_webversionFinal_CDRFinSIDs_20161104_webversion
Final_CDRFinSIDs_20161104_webversion
 

More from Energy for One World

Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdf
Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdfExtract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdf
Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdfEnergy for One World
 
2024 IEA Ministerial Communique- Paris 14th February 2024
2024 IEA Ministerial Communique- Paris 14th February 20242024 IEA Ministerial Communique- Paris 14th February 2024
2024 IEA Ministerial Communique- Paris 14th February 2024Energy for One World
 
MunichSecurityReport2024_Lose-lose.pdf
MunichSecurityReport2024_Lose-lose.pdfMunichSecurityReport2024_Lose-lose.pdf
MunichSecurityReport2024_Lose-lose.pdfEnergy for One World
 
UN Report: State of the Worlds Migratory Species report_E.pdf
UN Report: State of the Worlds Migratory Species report_E.pdfUN Report: State of the Worlds Migratory Species report_E.pdf
UN Report: State of the Worlds Migratory Species report_E.pdfEnergy for One World
 
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...Energy for One World
 
Clingendeal : TussenHoopenVrees2024
Clingendeal : TussenHoopenVrees2024Clingendeal : TussenHoopenVrees2024
Clingendeal : TussenHoopenVrees2024Energy for One World
 
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...Energy for One World
 
EFOW Agenda 2024 : Good Future Making
EFOW Agenda 2024 : Good Future MakingEFOW Agenda 2024 : Good Future Making
EFOW Agenda 2024 : Good Future MakingEnergy for One World
 
EFOW Brief : WEF Davos 2024- Re-Building Trust
EFOW Brief :  WEF Davos 2024- Re-Building TrustEFOW Brief :  WEF Davos 2024- Re-Building Trust
EFOW Brief : WEF Davos 2024- Re-Building TrustEnergy for One World
 
REN21 2023 Report: State of Global Renewable Energy
REN21 2023 Report: State of Global Renewable EnergyREN21 2023 Report: State of Global Renewable Energy
REN21 2023 Report: State of Global Renewable EnergyEnergy for One World
 
EFOW Brief: WEF Davos 2024- Re-Building Trust
EFOW Brief: WEF Davos 2024- Re-Building TrustEFOW Brief: WEF Davos 2024- Re-Building Trust
EFOW Brief: WEF Davos 2024- Re-Building TrustEnergy for One World
 
UN SDSN : Europe Sustainable Development Report
UN SDSN : Europe Sustainable Development ReportUN SDSN : Europe Sustainable Development Report
UN SDSN : Europe Sustainable Development ReportEnergy for One World
 
DNV report: Industry electrification
DNV report: Industry electrificationDNV report: Industry electrification
DNV report: Industry electrificationEnergy for One World
 
FT: COP28 Key Takeaways for Business
FT: COP28 Key Takeaways for BusinessFT: COP28 Key Takeaways for Business
FT: COP28 Key Takeaways for BusinessEnergy for One World
 
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...The planetary commons: A new paradigm for safeguarding Earth- regulating syst...
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...Energy for One World
 
Secretary-General's Special Address to the World Economic Forum [as delivered...
Secretary-General's Special Address to the World Economic Forum [as delivered...Secretary-General's Special Address to the World Economic Forum [as delivered...
Secretary-General's Special Address to the World Economic Forum [as delivered...Energy for One World
 
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...Energy for One World
 
2023 Edelman Trust Barometer Global Report FINAL
2023 Edelman Trust Barometer Global Report FINAL2023 Edelman Trust Barometer Global Report FINAL
2023 Edelman Trust Barometer Global Report FINALEnergy for One World
 

More from Energy for One World (20)

Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdf
Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdfExtract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdf
Extract Slides: Munich Security Conference 2024_ Lose- Lose_ (3).pdf
 
2024 IEA Ministerial Communique- Paris 14th February 2024
2024 IEA Ministerial Communique- Paris 14th February 20242024 IEA Ministerial Communique- Paris 14th February 2024
2024 IEA Ministerial Communique- Paris 14th February 2024
 
MunichSecurityReport2024_Lose-lose.pdf
MunichSecurityReport2024_Lose-lose.pdfMunichSecurityReport2024_Lose-lose.pdf
MunichSecurityReport2024_Lose-lose.pdf
 
UN Report: State of the Worlds Migratory Species report_E.pdf
UN Report: State of the Worlds Migratory Species report_E.pdfUN Report: State of the Worlds Migratory Species report_E.pdf
UN Report: State of the Worlds Migratory Species report_E.pdf
 
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...
A Simple Case for Re-building Trust (WEF Davos 2024)_ Energy, Transition, Cli...
 
Clingendeal : TussenHoopenVrees2024
Clingendeal : TussenHoopenVrees2024Clingendeal : TussenHoopenVrees2024
Clingendeal : TussenHoopenVrees2024
 
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...
Secretary-General's remarks to the General Assembly on Priorities for 2024 [s...
 
EFOW Agenda 2024 : Good Future Making
EFOW Agenda 2024 : Good Future MakingEFOW Agenda 2024 : Good Future Making
EFOW Agenda 2024 : Good Future Making
 
EFOW Brief : WEF Davos 2024- Re-Building Trust
EFOW Brief :  WEF Davos 2024- Re-Building TrustEFOW Brief :  WEF Davos 2024- Re-Building Trust
EFOW Brief : WEF Davos 2024- Re-Building Trust
 
REN21 2023 Report: State of Global Renewable Energy
REN21 2023 Report: State of Global Renewable EnergyREN21 2023 Report: State of Global Renewable Energy
REN21 2023 Report: State of Global Renewable Energy
 
EFOW Brief: WEF Davos 2024- Re-Building Trust
EFOW Brief: WEF Davos 2024- Re-Building TrustEFOW Brief: WEF Davos 2024- Re-Building Trust
EFOW Brief: WEF Davos 2024- Re-Building Trust
 
UN SDSN : Europe Sustainable Development Report
UN SDSN : Europe Sustainable Development ReportUN SDSN : Europe Sustainable Development Report
UN SDSN : Europe Sustainable Development Report
 
IEA Global Electricity Report
IEA Global Electricity ReportIEA Global Electricity Report
IEA Global Electricity Report
 
DNV report: Industry electrification
DNV report: Industry electrificationDNV report: Industry electrification
DNV report: Industry electrification
 
FT: COP28 Key Takeaways for Business
FT: COP28 Key Takeaways for BusinessFT: COP28 Key Takeaways for Business
FT: COP28 Key Takeaways for Business
 
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...The planetary commons: A new paradigm for safeguarding Earth- regulating syst...
The planetary commons: A new paradigm for safeguarding Earth- regulating syst...
 
Secretary-General's Special Address to the World Economic Forum [as delivered...
Secretary-General's Special Address to the World Economic Forum [as delivered...Secretary-General's Special Address to the World Economic Forum [as delivered...
Secretary-General's Special Address to the World Economic Forum [as delivered...
 
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...
WEF/ McKinsey : Seizing the momentum to build resilience for a future of sust...
 
2023 Edelman Trust Barometer Global Report FINAL
2023 Edelman Trust Barometer Global Report FINAL2023 Edelman Trust Barometer Global Report FINAL
2023 Edelman Trust Barometer Global Report FINAL
 
IEA Global Renewables Report 2023
IEA Global Renewables Report 2023IEA Global Renewables Report 2023
IEA Global Renewables Report 2023
 

Recently uploaded

DLL MATHEMATICS 6 DLL Quarter 3 Week4.docx
DLL MATHEMATICS 6 DLL Quarter 3 Week4.docxDLL MATHEMATICS 6 DLL Quarter 3 Week4.docx
DLL MATHEMATICS 6 DLL Quarter 3 Week4.docxSaRah862902
 
2024: The FAR, Federal Acquisition Regulations - Part 6
2024: The FAR, Federal Acquisition Regulations - Part 62024: The FAR, Federal Acquisition Regulations - Part 6
2024: The FAR, Federal Acquisition Regulations - Part 6JSchaus & Associates
 
501 c3 - Determination Letter - First Tee Puerto Rico
501 c3 - Determination Letter - First Tee Puerto Rico501 c3 - Determination Letter - First Tee Puerto Rico
501 c3 - Determination Letter - First Tee Puerto RicoFirst Tee Puerto Rico
 
The State of Ageing - understanding ethnic inequalities in later life
The State of Ageing - understanding ethnic inequalities in later lifeThe State of Ageing - understanding ethnic inequalities in later life
The State of Ageing - understanding ethnic inequalities in later lifeCentre for Ageing Better
 
MC_forecasts_finals series 17_feb2024.pdf
MC_forecasts_finals series 17_feb2024.pdfMC_forecasts_finals series 17_feb2024.pdf
MC_forecasts_finals series 17_feb2024.pdfARCResearch
 
The Health Foundation Volunteer Form
The Health Foundation Volunteer FormThe Health Foundation Volunteer Form
The Health Foundation Volunteer Formthfhepatitis2007
 
Saving for today. And tomorrow. How to boost households' financial resilience...
Saving for today. And tomorrow. How to boost households' financial resilience...Saving for today. And tomorrow. How to boost households' financial resilience...
Saving for today. And tomorrow. How to boost households' financial resilience...ResolutionFoundation
 
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...Improved Seed for Nutrition and Food Security for Farming Communities in Mada...
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...SeedSystemsGroup
 
Trading standards: How exposure to global trade shapes our living standards
Trading standards: How exposure to global trade shapes our living standardsTrading standards: How exposure to global trade shapes our living standards
Trading standards: How exposure to global trade shapes our living standardsResolutionFoundation
 
2024: The FAR, Federal Acquisition Regulations - Part 7
2024: The FAR, Federal Acquisition Regulations - Part 72024: The FAR, Federal Acquisition Regulations - Part 7
2024: The FAR, Federal Acquisition Regulations - Part 7JSchaus & Associates
 
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptx
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptxMateri Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptx
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptxElvisJunior16
 
The First Half Century (1894-1945) - Milestones in radio.
The First Half Century (1894-1945) - Milestones in radio.The First Half Century (1894-1945) - Milestones in radio.
The First Half Century (1894-1945) - Milestones in radio.Christina Parmionova
 

Recently uploaded (16)

Revised Investigative Report on City Officials
Revised Investigative Report on City OfficialsRevised Investigative Report on City Officials
Revised Investigative Report on City Officials
 
World Radio Day 2024
World Radio Day 2024World Radio Day 2024
World Radio Day 2024
 
Rahil Foundation
Rahil Foundation Rahil Foundation
Rahil Foundation
 
DLL MATHEMATICS 6 DLL Quarter 3 Week4.docx
DLL MATHEMATICS 6 DLL Quarter 3 Week4.docxDLL MATHEMATICS 6 DLL Quarter 3 Week4.docx
DLL MATHEMATICS 6 DLL Quarter 3 Week4.docx
 
2024: The FAR, Federal Acquisition Regulations - Part 6
2024: The FAR, Federal Acquisition Regulations - Part 62024: The FAR, Federal Acquisition Regulations - Part 6
2024: The FAR, Federal Acquisition Regulations - Part 6
 
501 c3 - Determination Letter - First Tee Puerto Rico
501 c3 - Determination Letter - First Tee Puerto Rico501 c3 - Determination Letter - First Tee Puerto Rico
501 c3 - Determination Letter - First Tee Puerto Rico
 
The State of Ageing - understanding ethnic inequalities in later life
The State of Ageing - understanding ethnic inequalities in later lifeThe State of Ageing - understanding ethnic inequalities in later life
The State of Ageing - understanding ethnic inequalities in later life
 
MC_forecasts_finals series 17_feb2024.pdf
MC_forecasts_finals series 17_feb2024.pdfMC_forecasts_finals series 17_feb2024.pdf
MC_forecasts_finals series 17_feb2024.pdf
 
PPT LESSON G-9.pptx
PPT LESSON G-9.pptxPPT LESSON G-9.pptx
PPT LESSON G-9.pptx
 
The Health Foundation Volunteer Form
The Health Foundation Volunteer FormThe Health Foundation Volunteer Form
The Health Foundation Volunteer Form
 
Saving for today. And tomorrow. How to boost households' financial resilience...
Saving for today. And tomorrow. How to boost households' financial resilience...Saving for today. And tomorrow. How to boost households' financial resilience...
Saving for today. And tomorrow. How to boost households' financial resilience...
 
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...Improved Seed for Nutrition and Food Security for Farming Communities in Mada...
Improved Seed for Nutrition and Food Security for Farming Communities in Mada...
 
Trading standards: How exposure to global trade shapes our living standards
Trading standards: How exposure to global trade shapes our living standardsTrading standards: How exposure to global trade shapes our living standards
Trading standards: How exposure to global trade shapes our living standards
 
2024: The FAR, Federal Acquisition Regulations - Part 7
2024: The FAR, Federal Acquisition Regulations - Part 72024: The FAR, Federal Acquisition Regulations - Part 7
2024: The FAR, Federal Acquisition Regulations - Part 7
 
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptx
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptxMateri Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptx
Materi Kemendagri 3. Paparan NUG SULUT 47 Tahun 21.pptx
 
The First Half Century (1894-1945) - Milestones in radio.
The First Half Century (1894-1945) - Milestones in radio.The First Half Century (1894-1945) - Milestones in radio.
The First Half Century (1894-1945) - Milestones in radio.
 

CISL: Executive Summary Risk Sharing for Loss and Damage

  • 1. Risk Sharing for Loss and Damage Scaling up protection for the Global South
  • 2. Authors Lead author: Dr Ana Gonzalez Pelaez, Fellow, CISL Co-authors: Dr James Daniell, Natural Hazards Engineer, Center for Disaster Management and Risk Reduction Technology (CEDIM) at Karlsruhe Institute of Technology and the University of Adelaide, and CEO, Risklayer Rowan Douglas, Chair, Operating Committee, Insurance Development Forum Charles Langdale, Chair, Climate Risk and Resilience, Howden Group Adarsh Narayanan Krishnan, Analyst, Climate Parametrics Practice, Howden Group CISL team: Sid Miller, Director, ClimateWise Natalie Thompson, Senior Project Manager, ClimateWise Dr Nina Seega, Director, Centre for Sustainable Finance   Laura Deltenre, Senior Project Manager, ClimateWise Dr Mohsen Gul, Senior Project Manager, Banking Environment Initiative Adele Williams, Director, Communications Asha Tharoor, Media Consultant, Communications Maisie Ormrod, Communications Manager, Communications Emily Hamm, Project Co-ordinator, Centre for Sustainable Finance Tom Yorke, Design & Brand Manager Laura Cochrane-Davies, Senior Communications Manager Designer: Clair Jackson Citing this report University of Cambridge Institute for Sustainability Leadership (CISL). (2023). Risk sharing for Loss and Damage: Scaling up protection for the Global South. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership. Copyright Copyright © 2023 University of Cambridge Institute for Sustainability Leadership (CISL). Some rights reserved. The material featured in this publication is licensed under the Creative Commons Attribution-NonCommercial- ShareAlike 4.0 International Licence (CC BY-NC-SA 4.0). The University of Cambridge Institute for Sustainability Leadership CISL is an impact-led institute within the University of Cambridge that activates leadership globally to transform economies for people, nature and climate. Through its global network and hubs in Cambridge, Cape Town and Brussels, CISL works with leaders and innovators across business, finance and government to accelerate action for a sustainable future. Trusted since 1988 for its rigour and pioneering commitment to learning and collaboration, the Institute creates safe spaces to challenge and support those with the power to act. Acknowledgements Advisory Board Sara Ahmed, Finance Advisor to the V20 Dr Annette Detken, Head, Global Shield Solutions Platform Jorge Gastelumendi, Director Global Policy, Atlantic Council Dr Rashmin Gunasekera, Senior Disaster Risk Management Specialist, World Bank David Howden, CEO, Howden Group Ekhosuehi Iyahen, Secretary General, Insurance Development Forum Jan Kellett, Team Leader Insurance and Risk Finance Facility, UNDP Nick Moody, Co-leader, Global Risk Modelling Alliance Justin Mundy, Chair, SLM Partners Dr Youssef Nassef, Head of Adaptation, UNFCCC Dr Nicola Ranger, Director, Resilient Planet Finance Lab Tomas Soley, Chair, IAIS Financial Inclusion Forum of insurance regulators Note: Input and guidance received from members of the Advisory Board does not imply or represent an official position, opinion, judgement or endorsement on their part or of their organisations, CISL, the wider University of Cambridge or clients. Additional Contributions Climate Champions team: Sabrina Nagel, David Howlett, Marcia Toledo Sotillo. COP28 Presidency: Christopher Frassetto, Helena de Jong, Anusha Seshadri. Howden Group: Shevon Cartwright, Matthew Foote, David Flandro, Rod Fox, Philipp Kusche, Hayley Langston, Martin Mak, Amy Parkes, Craig Pettengell, Kapil Radia, Elliot Richardson, Tim Ronda, Sophie Sacarello, Henrietta Southby, Man Wai Cheung, Lucy Tunkin, Victoria Waite. Regional risk pools: Isaac Anthony (CCRIF SPC), Malvern Chirume (ARC), Yoshihiro Kawai (SEADRIF), Aholotu Palu (PCRIC). Risklayer, CEDIM and Institute of Photogrammetry and Remote Sensing: Johannes Brand, Andreas Schaefer. Various organisations: Izzy Ashe (FTI Consulting), Kathy Baughman McLeod (Climate Resilience For All), Antoine Bavandi (Gallagher Re.), Ritu Bharadwaj (IIED), Rebekah Clement (SMI), Jamila Elmir (Private Office H.E. Razan Al Mubarak), Eduarda Fontes (Insurance Development Forum), Celia Gonzalez Haug (SUGESE), Prof Saleemul Huq (ICCCAD), Angus Kirk (Global Parametrics), Jenty Kirsch-Wood (UNDRR), Kipkorir Koskei (Insurance Development Forum), Alexandra Kriegsheim (UNFCCC), Panayotis Koulovasilopoulos (Hiscox), Nathanial Matthews (Global Resilience Partnership), Ivo Menzinger (Swiss Re), Tom Mitchell (IIED), Dr Paul Munday (S&P Global Ratings), Maris Tebecis (Global Counsel). Personal thanks to Maren and Jacob Daniell, Rebecca and Sergio Douglas-Gonzalez. This report has been prepared with the support of Howden.
  • 3. This briefing offers a breakthrough in the design of the global financial architecture for Loss and Damage. It demonstrates how the economic efficiency of risk-sharing systems can convert modest annual financial flows from donors into major contractual entitlements from the risk capital markets for vulnerable countries when disasters strike, now and through to 2050. After 30 years of negotiations, governments agreed at COP27 to support financially the most climate-vulnerable developing countries, in the process known as Loss and Damage (L&D). It was also recognised that L&D will require multiple, complementary approaches, a “mosaic of solutions”.1 As part of this mosaic, in August 2023, Small Island Developing States (SIDS) and Least Developed Countries (LDCs) identified risk-sharing systems in the recommendations proposed to operationalise L&D.2 These developments highlight an urgent need to define how risk-sharing systems can be implemented for L&D, including the climate risk analysis necessary to inform funding requirements and access financial markets. This briefing addresses this gap by analysing a diverse sample of countries that illustrate approaches relevant to all LDCs, SIDS and the Vulnerable Twenty (V20). We provide three new contributions to the design of the global financial architecture for L&D: • Quantifying current and future climate risks, across national economies to 2050, with the methods and metrics used by risk capital markets, so that climate financial risks from the Global South can be shared internationally. • Quantifying the estimated costs of securing national economies and designing a strategic vision for protecting vulnerable countries from the impacts of climate shocks on their gross domestic product (GDP). We introduce into L&D the well-established financial concept of umbrella stop-loss, meaning that losses above a defined level are protected by pre- arranged financing. • Illustrating a first step for implementation of L&D risk- sharing systems. We evaluate how an initial allocation of USD 10 million donor funds per country could generate immediate protection, at scale, through the risk capital markets. Key messages • Risk-sharing systems, supported by donors, that transfer the financial burdens of climate risks from the Global South to the international risk capital markets should be a central pillar of the L&D architecture. • As an immediate step to establish a L&D global risk- sharing mechanism, LDCs, V20 and donor-qualifying SIDS should be allocated USD 10 million annually in premium support from L&D related funds. Each country would receive on average USD 200 to 300 million in pre-arranged annual protection to support their highest priority needs for more frequent climate shocks: eg humanitarian response; recovery of schools, hospitals and critical infrastructure; sovereign debt repayments; agricultural support; and restoration of marine and terrestrial ecosystems. Across 100 countries, this would provide approximately USD 25 billion of pre-arranged finance for an annual cost of around USD 1 billion. • Using the economic efficiency of risk-sharing systems for climate risks, the international community should commit to an L&D strategic objective of introducing umbrella stop-loss mechanisms to protect the national economies of vulnerable countries in the Global South, with thresholds set at appropriate levels depending on the size of the economy and levels of risk. • As an initial umbrella stop-loss commitment, the smallest and most vulnerable countries, such as those under one million population, should be protected from losing more than 10 per cent of their annual GDP from climate-related events. At present, most of these countries are at risk of losing more than 100 per cent of their annual GDP from climate shocks. • These L&D interventions could be implemented through existing institutions including national governments, development institutions, regional risk pools, international donors and global risk capital markets. Executive Summary 4
  • 4. Additional findings for V20 Small Island Developing States (SIDS) The analytical part of this study has been carried out on a group of 11 V20 SIDS, with populations under one million, representing very different geographies, economies and perils. Key findings: • These SIDS now face foreseeable losses of between 50 per cent and over 100 per cent of GDP from extreme climate events, such as severe droughts, tropical cyclones and floods. With climate change, these risks are set to grow between 10 and 15 per cent by 2050, approximately 0.5 per cent per year. This is an intolerable burden of financial risk to achieve sustainable development, prosperity and security. Such extreme events can strike tomorrow and the SIDS are currently bearing these risks. • Overall economic losses from climate shocks to the 11 SIDS in this study could be limited to a maximum of 10 per cent of GDP equivalent per year, with approximately USD 300 million annually from L&D donors to unlock contractual entitlements of up to USD 25 billion across these countries from the risk capital markets. This would cover a large range of risks, from the more frequent events (eg 5 per cent annual probability) to the most extreme shocks (0.1 per cent annual probability). The umbrella stop-loss would be achieved through a range of parametric programmes with specific hazard triggers for defined climate-related events which would contribute to losses equivalent to more than 10 per cent of GDP . • As a first step, this study shows that USD 10 million of annual pure premium (price of risk without additional defined expenses) per SIDS could generate an average annual protection of approximately USD 250 million per country, from more frequent risks (more than USD 2.5 billion across the 11 countries). • Despite growing risks from climate change, this study has revealed that the economies of these countries remain insurable to 2050, while displaying some of the highest annual average losses in the world.3,4 The viability of pre-arranged protection gives these SIDS more time to adapt and reduce vulnerabilities, greater financial security to prosper and quantified knowledge to make more informed decisions for resilient development. • A geographically diverse L&D umbrella facility for the economies of these countries, implemented through the regional risk pools, would create a large, diversified portfolio to unlock the global risk capital markets at the lowest price for donors. Risk Sharing for Loss and Damage 5