Climate risk insurance

Climate risk insurance describes a suite of instruments for financial risk transfer that protects against risks arising from extreme weather events that are increasing in frequency and intensity because of climate change. The mechanism can offer regional entities, governments, institutions, companies, community groups, households, and individuals protection against loss of life, livelihood, or assets caused by extreme weather events. It ensures effective and rapid post-disaster payments to the insured individual, household, community group, company, institution, government, or regional entity.

While hazards are directly determined by climate change, vulnerability and exposure depend on socio-economic factors. Planning adaptation regionally and locally requires an understanding of these three factors, to produce a climate risk assessment.