Research published today, Tuesday, indicates that wealthy nations could provide up to $25 billion annually to protect 100 of the world's most vulnerable countries from climate disasters, translating to a mere $10 million for each nation. These findings come a week before the United Nations climate summit (COP28) in Dubai, where countries are set to launch the world's first fund aimed at helping nations tackle the costs of climate-related damages.
Amid pressure on affluent countries to fill this financial gap, researchers from the Cambridge Institute for Sustainability Leadership noted they have achieved a "breakthrough" in understanding how these funds can be deployed to shield nations from the escalating costs of storms, droughts, and rising sea levels.
Firstly, the researchers' findings confirm that the most climate-vulnerable countries have no access to insurance from insurers or capital markets until 2050, based on risk modelling imposed by climate change. Dr. Ana Gonzalez-Perez, the lead author of the study who granted Reuters an exclusive look before its release, said, "This is enormous because there is a preconceived notion that these countries are untouchable." She added, "In reality, we have the data showing they can be insured."
Secondly, the researchers demonstrated that risk-sharing systems, primarily insurance schemes, could utilize donor contributions to fund "premiums" for climate damage protection, significantly increasing the coverage available for climate-vulnerable nations. They mentioned that using donor funds of $10 million per country as premium support could yield between $200 million and $300 million in pre-arranged annual protection, amounting to a total of $25 billion if spread across 100 countries.
The scheme will utilize this relatively modest funding from donors to provide insurance against the most costly yet unpredictable climate risks, such as hurricanes and floods, which may occur only once every decade or so. Rowan Douglas, CEO of the Climate Risks and Resilience division at the UK-based Howden Insurance, who co-authored the research, stated, "The idea is to use this new source of funding to protect these countries at a structural level." Douglas added, "Currently, there is no product that protects national economies in this way."
The need for action is urgent. The study indicated that small island developing states face potential losses ranging from 50% to 300% of their gross domestic product due to extreme climate phenomena.
