Today in the high-level statements, Germany made a €170 million commitment to the Global Protection Shield, a joint initiative between the G7 and the V20. The fact that the G7 and the Climate Vulnerable Forum have chosen to announce this initiative at COP27 is recognition that the poorest and least responsible need help, but that opening sentence highlights the inadequacy of this initiative. This is one member of the G7, and the V20 don’t have any choice as no other substantial finance contributions to pay for loss and damage is on offer.
The global shield aims to build on the “Insuresilience” Initiative to deliver innovative insurance products to compensate people for climate impacts. But insurance isn’t affordable for the people who really need it, doesn’t cover all of the losses these people are facing and if it is going to operate long term, it needs robust domestic insurance markets. It may be an appropriate modality for some climate costs, but it is totally inadequate to the scale of the losses currently being experienced.
For example, Pakistan is facing consecutive heat followed by flood emergencies with losses at a catastrophic scale. This is something that insurance markets are just not resilient enough to withstand as was experienced in Germany in 2021 when the government was forced to step in following the catastrophic flooding in the Ahr valley. Loss and damage finance needs to be new and additional; it needs to be grant-based and delivered at a scale commensurate to the needs of impacted people and not limited by what markets can tolerate.