Climate and Disaster Risk
Finance and Insurance

Innovative financial mechanisms,
instruments, and concepts to safeguard
the vulnerable against adverse
impacts of climate and disaster risks


Since 2016, BMZ has been financing measures in Zambia aimed at strengthening the insurance model linked to contract farming, ensuring its sustainability and identifying possibilities for its further spread in the country. NWK’s contract farming framework shows that index-based climate risk insurance products can foster sustainable business opportunities for agricultural companies. The project carried out by GIZ supports the further development, dissemination and expansion of the insurance model linked to contract farming throughout the industry. The aim of this model is to be replicated by other agricultural companies within Zambia and other countries, increasing smallholder farmers´ access to climate risk insurance.

InsuResilience Global Project in Zambia

Direct involvement of municipalities for effective disaster risk management in the Greater Accra Metropolitan Area, Ghana.

Check out how GIZ develoPPP and Allianz Re together with local partners reach the households most affected by flooding through risk-transfer solutions for municipalities and their public assets.  

Developing Meso-Level Disaster Risk Management Approaches for Climate Risks in Ghana- InsuResilience Global Partnership

The Greater Accra Metropolitan Area (GAMA) suffers from rainrelated floods almost every year. This development is likely the result of several factors, including a rapid expansion of sealed-off surface, unplanned urbanization, weak infrastructure, inefficient waste collection and disposal system, as well as a changing climate with more intense rainfall events compared with earlier decades. GAMA is the economic hub of Ghana and is made of 29 metropolitan, municipal and district assemblies with an estimated 5.1 million inhabitants – making it the seventh-largest metropolitan area in Africa1 .

The severe flood event of 2015 served as a wake-up call to many stakeholders. It was reported as among the ten deadliest disasters worldwide in 2015, affected 52,622 people with 150 deaths recorded. Damage to infrastructure totaled US$55 million, and rebuilding costs were estimated at US$105 million2 . The disaster has already led to a variety of activities that should lead to better flood risk management. So far, these activities have focused on data collection and analysis, infrastructure improvements and capacity building. Risk transfer, as a component of an Integrated Disaster Risk Management (IDRM)3 approach had not yet been looked at. Since extreme weather events cannot be totally avoided, some residual risks will remain whatever preventive measures are applied.

Developing Disaster Risk Management Approaches for Climate Risks in Ghana |Index Insurance Forum

The Greater Accra Metropolitan Area (GAMA), Ghana experiences perennial rain events on an almost annual basis. This heavy rainfall causes significant economic and physical losses to the Accra region. For instance, approximately 40% of all assets managed by Accra Metropolitan Assembly (AMA) have reported flooding in previous years, while 40 AMA-managed assets are located in major flood zones. Estimates point to roughly ninety million Ghanaian Cedi (GHS) of material damages for these premises.

Developing an appropriate insurance product is thus vital in coping with these flood risk damages. It is one of the key parts of the integrated flood risk management project in GAMA — a joint project by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and Allianz Reinsurance. As a part of this project, an indemnity-based flood cover for three municipalities (GA East, GA West, and AMA) has been designed. It covers the aggregated losses of all insured assets managed by a municipality that are hit by a severe single flood event. The claims pay-out includes replacement costs of insured premises, unsecured inventories, and a 20% buffer for emergency relief measures. The scope of this project is limited to the geographical boundaries of GAMA to ensure a focused product design.

This insurance product is not only relevant for GAMA, but also acts as a serious alternative risk financing route for other regions that regularly and increasingly experience severe flooding. The design of this product can be easily adapted to different municipality’s needs, if sufficient portfolio and loss data as well as the willingness to invest in risk reduction and preparedness activities are available. Advantages include the benefits of prevention vis-à-vis curing, as well as speed and certainty of damage cover.

Design of a Flood Cover Insurance for Public Assets in Ghana

The industrial zone in Aït Melloul was selected as a pilot zone due to its historical exposure to flash floods which have caused significant financial losses. It lies in the Souss Massa region, 20km from the port of Agadir. This industrial zone is managed by the local government in close cooperation with the business association Association des Investisseurs de la ZI d’Aït Melloul (ADIZIA) and hosts approximately 300 enterprises, most of which are SMEs operating in the food processing industry. Overall, 25,000 employees depend directly or indirectly on business in this industrial zone.

The park was successively hit by major floods in 2010, 2014 and 2016 caused by heavy precipitation events. A badly maintained drainage system is essentially responsible for the damage and losses which occurred. In addition, a low level of risk awareness and prevention by the individual companies increased the impact. The plight of Aït Melloul is indicative of broader climate trends facing the country. The effects of climate change are more and more present in Morocco, which has been identified as very vulnerable country by the 4th Assessment Report of the United Nations Intergovernmental Panel on Climate Change (IPCC). Thus, SMEs in Morocco are vulnerable to a broad range of extreme weather events such as floods, severe rainfalls, heatwaves and droughts, which become more frequent in warmer climate conditions.

Developing Climate Risk Management Approaches for SMEs in Morocco

The project offers participating government partners an enhanced risk assessment and subsequent understanding of selected climate risks in both countries. By utilizing the Economics of Climate Adaptation (ECA) framework in combination with non-economic and macroeconomic impact modelling, a comprehensive risk analysis for specific sectors and populations is obtained.

In addition, the cost-benefit ratios for possible adaptation measures are examined to advise the governments on most suitable adaptation strategies. Besides risk reduction efforts, the project will highlight the importance of incorporating financial risk retention and transfer instruments, like climate insurance or contingency budgets, in order to address residual risk.

The target groups are Ministries and similar agencies of Egypt and Thailand involved in or responsible for the countries’ and/ or sectoral comprehensive (Climate) Risk Management and Risk Financing approaches; as well as climate risk modelling experts across the globe.

The overall aim of the project is to provide the government partners in Thailand and Egypt with an enhanced risk assessment for the development of climate change adaptation and, subsequently climate and disaster risk financing strategies.

Enhancing Risk Assessments (ERA) for Improved Country Risk Financing Strategies

The agricultural sector is a key segment of the Paraguayan economy, representing 30% of gross domestic product, 40% of exports, and the source of employment for a large majority of the rural population.1 Given the importance of this sector, agricultural risks are key to the economic and social health of Paraguay. Family farmers and their households, representing 90% of the total farms, are the ones most at risk of being trapped or falling into poverty due to external shocks and to the lack of adequate protection mechanisms.

Due to the country’s subtropical temperate climate, characterized by a rainy season in summer and a dry season in winter, it is exposed to harsh impacts of climate change. The vital agricultural sector is particularly affected by a significantly elevated level of exposure to multiple hazards, notably floods and droughts. Income inequality, lack of social and financial protection as well as low soil fertility, and scarcity of fresh water are key drivers of vulnerability.

Strengthening the resilience of the vulnerable rural population

For more than 30 years, GIZ has been working with its partners on inclusive agricultural insurance projects around the world, from regulation and implementation to financial literacy and market development. We are proud to present this update on the state of agricultural insurance in low- and middle-income countries and current innovations and good practices shaping the future of the field.

Innovations and emerging trends in agricultural insurance for smallholder farmers – an update

The Inclusive Insurance Factsheet Series, developed by the GIZ Sector Programme “Global Initiative for Access to Insurance”, highlights how insurance as a tool contributes towards meeting the needs of vulnerable individuals, households and micro, small and medium-sized enterprises (MSMEs) in developing countries and emerging economies. It furthermore accentuates insurance’s role in helping achieve goals of the following development agendas: sustainable development and poverty alleviation, gender and women’s empowerment, agricultural development and food security, MSME development, and climate change mitigation and adaptation.

Managing Climate Risk with Extreme Weather Insurance – Inclusive Insurance Factsheet