Tim McCosh, CEO of Yokahu, calls on governments to issue a legal mandate to the re/insurance sector to produce the innovation required for faster, more impactful action on the ground for improving resilience to climate change where it is most needed

All the policy signals ahead of the 27th United Nations Climate Change Conference (COP 27) taking place from 7-18 November 2022 in Egypt point to a lot more hot air from global leaders around accelerating efforts to confront climate change.

 But we cannot afford for COP27 to be a talking shop where ideas are bandied around and wooly commitments are made on a grand scale. Let’s face it, more hot air is the last thing we need.


This 27th COP must achieve radically different outcomes compared with the 26 conferences that have come before.

 There are increasing policy signals that agreements and strategies around insurance and the formation of a Global Shield against Climate Risks community of public, private and humanitarian parties will form a key part of the outputs from COP27. 

 We agree, addressing climate change should not be about aid post-event anymore. This is well accepted; but moving the needle on what needs to be done to ensure the private sector is involved in supporting vulnerable communities before a catastrophic event has thus far been elusive. 


Are climate risks uninsurable?

 Many climate-related risks such as droughts and hurricanes hitting poor communities are too often considered uninsurable by the private sector. And many of the most vulnerable people who are impacted by climate change do not have access to traditional banking and insurance services. 

 There is a very immediate need for liquidity straight after an event – a need faced by individuals who may have lost their homes, or businesses that have been damaged, and governments who face massive damage to infrastructure.

 Food security is a critical case in point. With efficiencies through technology here the supply chain can insure the farmers as well as their balance sheets with the right products, that offer faster payouts than traditional insurance to allow for more resilience and faster recovery in the event of a catastrophe. 

 But the truth is that from the government side, it is unlikely that policymakers on their own will produce the innovation that is so badly needed. 


Governments can legislate to force the private sector into further action 

 The availability of affordable, transparent insurance for climate vulnerable communities could be instantly accelerated with the right action from governments. 

 This would also benefit insurers’ own environmental, social and governance (ESG) goals, particularly those ESG initiatives aimed at poor populations that have been excluded from the traditional insurance market. 


Innovation, innovation, innovation

 Parametric insurance offers much needed efficiency, speed, trust and resilience that is simply not available on the traditional market. Parametric premiums are also relatively low, and have lower transaction costs than traditional insurance, offering 100% reserving transparency for insurers and 100% claims transparency for policyholders. 

Taking this approach to disaster insurance helps to improve resilience and creates a pool of liquidity made immediately available when a catastrophe occurs. 

Parametric schemes have already been launched at national level in some countries, aimed specifically at tackling climate change. This is excellent progress and we look forward to seeing such schemes expanded. 

The potential to scale parametric insurance is immense – we have the technology available right now to apply the automatic triggers to other areas including crop insurance, for instance, which in turn could help improve global food security and resilience to systemic shocks. 

We firmly believe that the parametric approach offers the simplicity and efficiency required to help close the climate protection gap, and make our world more resilient to climate change. 

Parametric insurance must be recognised widely as one of the most critical finnovation tools in the climate resilience toolbox, and we will be watching closely as the COP27 conversation develops. 


Meanwhile, we will continue to take action on the ground, where we know we can make an immediate difference right now