Glasgow, 9 November 2021: The Vulnerable Twenty Group of Finance Ministers (V20) — comprising 55 climate vulnerable economies with a combined population of 1.4 billion people — reached one of their key milestones during a high level event today, and launched the V20 Sustainable Insurance Facility (SIF). The high level meeting was jointly convened at the sidelines of COP26 by the V20, the UN Environment Programme’s Principles for Sustainable Insurance (PSI), the Munich Climate Insurance Initiative (MCII) and the G20+ and V20-led InsuResilience Global Partnership.
According to the latest IPCC report from August 2021, severe climate impacts, originally thought to be more long term, will materialize much sooner than expected. Climate change is now in a constant state of acceleration and this can only spell economic and financial disruption and destruction while leaving behind devastation for the world’s most climate vulnerable developing countries, and are beginning to impact developed countries.
Announcing the launch of the SIF, H.E. Brenson Wase, Minister of Finance of the Republic of the Marshall Islands, member of the V20 Troika and Co-Chair of InsuResilience highlighted that “the SIF has come a long way” and how “the need for comprehensive and climate-smart insurance solutions for micro, small and medium-sized enterprises (MSMEs) has first been highlighted in 2017, at our V20 Regional Consultation in the Asian Development Bank in Manila.”
According to Minister Wase, the V20-led SIF will now be operationalized as a Project Pipeline Facility and represents “the first vulnerable country-led implementation mechanism in this space to date.” He also specifically thanked the SIF’s technical partners, including MCII and the Asian Development Bank, and the German Federal Ministry for Economic Development and Cooperation (BMZ) for being the first G20+ member of the InsuResilience Global Partnership that has publicly confirmed its support. Dr. Maria Flachsbarth, Parliamentary State Secretary to the Federal Minister for Economic Cooperation and Development, Germany emphasized that “Germany is pleased to support the V20-led Sustainable Insurance Facility starting in 2021, as it will enable V20 countries to submit tailor-made project proposals to better protect small enterprises against extreme weather events.”
The SIF is a Project Pipeline Development Facility which will assist the members of the V20 in scoping the financial protection needs of MSMEs in the context of climate change, and in facilitating concept and proposal development for submission to risk financing vehicles. As such, the SIF aims to mobilize international financial and technical assistance, with the objective of stimulating climate-smart insurance offerings by domestic and regional insurers to protect MSMEs and the people that rely on them. The overall goals include building local and regional insurance markets to improve risk sharing and absorb financial shocks, developing resilient business models, and freeing up public and private resources for investment in resilience and growth.
In V20 countries, MSMEs contribute between 20 and 70 per cent of GDP, constitute more than 80 per cent of all businesses, and contribute to the countries’ export revenues. Vulnerable developing countries suffer from a 90 per cent protection gap for climate risks and non-life insurance penetration in V20 economies, usually indicative of the degree to which private sector is covered, mostly lies below one or between one to two percent. MSMEs and cooperatives aggregate large population parts and thereby provide the potential to reach many people — owners, employees or small, family-owned