Today at the Financing for Development Conference in Sevilla, Minister Chapman launched a global initiative to increase pre-arranged finance for disasters - with a focus on insurance - as part of an initiative seeking to increase global pre-arranged finance from 2% to 20% by 2035.
While pre-arranged finance is an important part of addressing climate-related and non-related disasters, CAN-UK is sceptical of the growing emphasis on the financialisation of risk by the UK government, which has a checkered history in terms of pay outs - one recent example is Jamaica’s World Bank-brokered catastrophe bond fails to pay despite devastation of Hurricane Beryl - Bretton Woods Project
Limited details were provided in today’s announcement, and with initiatives such as these the devil is in the detail.
CAN-UK welcomes the attention from the UK on the need to take greater action in advance of predictable disasters, but note there are many mechanisms for doing this beyond insurance, which has significant limitations. We also welcome the UK’s announcement to be the first country to report on pre-arranged finance and support all efforts for greater detail and transparency in financial reporting.
Catherine Pettengell, Executive Director of Climate Action Network UK (CAN-UK) said:
“Climate change impacts are escalating in frequency and severity. Insurance has a role to play, but climate change is like a pre-existing medical condition that bumps up premiums and makes payouts uncertain. Adapting livelihoods, infrastructure, and whole economies requires far more than insurance can offer - and UN Climate Funds such as the Fund for Responding to Loss and Damage are vital to deliver the grant finance needed. The growing UK government focus on the financialisation of risk - rather than the needs of frontline communities - risks benefits accruing to insurance companies rather than to people.
“Pre-arranged finance is an important tool for countries experiencing escalating impacts, but it is vital this is not debt creating, delivers finance quickly to those who need it, and strengthens institutions to adapt to climate change and address loss and damage long-term - and not until insurance companies deem it no longer insurable.
“The recently created Fund for Responding to Loss and Damage is a dedicated, democratic, and not-for-profit institution mandated to deliver for communities, and must urgently receive increased funding from the UK and other countries to meet the needs and fulfil this potential.”
Sophie Powell, Chief of UK Advocacy and Policy at Christian Aid said:
“With the UK aid cuts earlier this year and the complete lack of certainty about how the UK will deliver on its responsibilities to provide grant-based climate finance, the UK government is seeking to distract attention from its shortcomings with private finance schemes that won’t deliver for those on the frontline of the climate crisis. The UK’s announcement today on pre-arranged finance – as scant on details as it is - looks to insurance schemes that have a woeful record in reaching those hit by climate disasters. The UK needs to considerably raise its game on climate finance through grants-based finance at scale if it wants to rebuild its tarnished reputation and be a true partner to the global South.”
Tess Woolfenden, Policy Adviser at Debt Justice said:
“Making money accessible to lower-income countries in times of crisis is essential, but it must not come at the cost of deepening debt burdens. Countries are already facing unsustainable debt burdens linked to climate and humanitarian disasters they did not cause. This money must come as grants, not loans, to avoid fuelling a cycle of injustice and debt.”
ENDS.
Notes for editors:
- Climate Action Network UK (CAN-UK) brings together international development and environment organisations in the UK working on the poverty-nature-climate agenda to advocate for climate justice and sustainable development for all.
- CAN-UK is the UK node of Climate Action Network (CAN), a global network of more than 2,000 civil society organisations in over 130 countries driving collective and sustainable action to fight the climate crisis and to achieve social and racial justice. climatenetwork.org
- CAN-UK Executive Director Catherine Pettengell is available in Sevilla for interview.