As the world deals with the escalating impact of climate change, there is an urgent need for robust strategies to enhance climate resilience.

Rising sea levels, intensified storms, prolonged droughts, and other climate-related events are causing unprecedented damage to communities, economies, and ecosystems worldwide.

In the face of these challenges, policymakers must seek innovative solutions that not only
mitigate the impacts of climate change but also provide a safety net for those affected. An
insurance-based approach to climate resilience emerges as a strategic and pragmatic
solution that offers multifaceted benefits for individuals, businesses, and governments alike.

Traditional approaches to climate resilience have often been reactive, focusing primarily on
post-disaster relief and reconstruction efforts. While essential, these measures fail to
address the underlying issue of vulnerability to climate-related events.

Climate change is projected to increase the frequency and intensity of extreme weather
events, making it imperative to shift from reactive approaches to proactive ones that
prioritize risk reduction and preparedness.

An insurance-based approach enables the transfer of risk from individuals, businesses, and
governments to insurance providers. By sharing the financial burden of climate-related
damages, this approach ensures that the costs of recovery are not disproportionately borne
by the affected parties. This is especially critical for vulnerable communities and developing
nations that lack the resources to cope with large-scale disasters.

Insurance providers have a vested interest in reducing the frequency and severity of climate-
related events, as it directly impacts their bottom line. This creates a powerful incentive for
insurers to collaborate with policyholders to implement risk-reduction measures, such as
building resilient infrastructure, adopting sustainable land-use practices, and improving
disaster preparedness.

Insurance companies heavily rely on data to assess risks and set premiums. This emphasis
on data collection and analysis can be leveraged to enhance understanding of climate
vulnerabilities and inform evidence-based policymaking. By partnering with insurers,
policymakers can gain access to comprehensive risk assessments that can guide the
allocation of resources and development of targeted interventions.

Embracing an insurance-based approach fosters collaboration between the public and
private sectors. Governments can work hand in hand with insurance companies to design
and implement resilience-building initiatives, leveraging the expertise, financial resources,
and risk management strategies that both sectors bring to the table.

Swift and effective recovery from climate-related disasters is crucial to minimizing economic
disruptions. Insurance payouts can expedite the restoration of livelihoods and businesses,
helping communities rebound more quickly and reducing the overall economic impact of
climate-related events.

This approach has been particularly successful in cushioning pastoralists from loss of their
livestock to drought. As a case in point, the government paid insurance cover worth KSh.
255 million to cushion 17,000 livestock keepers in Wajir, Garissa, Samburu, and Tana River
counties against drought between October 2022 and February 2023.

In the face of escalating climate risks, policymakers must adopt innovative and
comprehensive strategies to enhance climate resilience. An insurance-based approach
offers a promising path forward, addressing both the immediate needs of communities
affected by climate-related events and the long-term imperative of reducing vulnerability.

By promoting risk transfer, incentivizing risk reduction, leveraging data, fostering
partnerships, and stimulating economic recovery, this approach not only protects the
interests of individuals and businesses but also contributes to building a more resilient and
sustainable future.

As we navigate the complexities of our changing climate, it is imperative that policymakers
recognise the importance of embracing an insurance-based approach as a cornerstone of
effective climate resilience efforts.

By Tobias Gitonga (GM – Reinsurance) and Michael Kamau (Resident Actuary) at Minet Kenya