A Defining Moment for Climate Action
The world is at a crossroads. Climate change is no longer a distant threat—it’s a daily reality for millions. Rising temperatures, unpredictable rainfall, and more frequent natural disasters are disrupting lives and livelihoods, especially in low-income countries where agriculture forms the backbone of local economies.
More than 500 million smallholder households—many of them in Africa, Asia, and Latin America—depend on agriculture for survival. This sector employs around 58% of the workforce in low-income nations, with women making up nearly half the workforce1, and contributes 25% of GDP. But it’s also among the most vulnerable to climate shocks.2 For smallholder farmers and pastoralists, a single drought or flood can erase years of hard work. Without safety nets, these shocks often push families deeper into poverty, making it harder to recover with each passing season. It’s clear: if we want to make meaningful progress in climate resilience, we must start by protecting the people most at risk. And that’s where index insurance comes in.
Why Index Insurance Matters
At its core, inclusive insurance is about more than just payouts. It’s a tool for equity, dignity, and resilience. It offers a way for vulnerable communities to manage risk proactively rather than reactively. One promising model is index insurance. Unlike traditional insurance, which relies on claims assessments, index insurance uses measurable data—like rainfall or temperature—to trigger payouts. That makes it faster, more transparent, and easier to scale, opening the door to groups traditionally excluded from insurance, particularly women, as it bypasses many of the barriers they face, including lack of land ownership, limited access to formal financial services, and complex claims documentation. Yet despite its potential, it remains severely underutilised, especially in the places that need it most.
What’s Holding Back Progress?
Here’s a quick look at the roadblocks standing in the way of widespread adoption:
The Path Forward: Lessons Learned, Models That Work
Despite the challenges, there is a wealth of experience to draw on. Some initiatives are showing what’s possible when insurance is designed with communities, not just for them. Let’s take a look at key lessons and the real-world examples that bring them to life.
Insurance works best when it’s integrated into a resilience ecosystem—including disaster reduction strategies, socialprotection programmes/systems, and climate-smart agricultural management.
The World Food Programme’s R4 Rural Resilience Initiative is a powerful illustration of this principle. It combines insurance with risk reduction, asset creation, and social protection—a holistic model that addresses both immediate shocks and long-term vulnerabilities. By embedding insurance within a wider package of support, R4 demonstrates that no single instrument can deliver resilience on its own—but when the pieces come together, the impact is transformative.
When done right, premium subsidies can help drive not just resilience, but transformation if they are conditioned to:
Of course, subsidies must be thoughtful, targeted and ideally should have an exit to avoid moral hazard and a long-lasting dependence. But the right kind of support can unlock new possibilities—especially for those who’ve traditionally been left behind.
From satellite data to AI-driven weather forecasting and mobile platforms, tech is making insurance more scalable and precise. But innovation must be paired with on-the-ground support.
One-size-fits-all won’t work. Insurance must be shaped by local realities, climate patterns, and cultural contexts.
In the Philippines, CARD Pioneer has become a leader in designing insurance that truly reflects the needs of low-income clients. By embedding insurance into everyday financial services and using SMS-based claims processing, they’ve made it simple, affordable, and trustworthy. What sets them apart is a relentless focus on customer education, clear communication, and fast, fair payouts. Their model shows that when people understand how insurance works—and see it in action—they’re far more likely to invest in it.
Governments, insurers, and communities alike need training and tools to navigate this complex space. Capacity building is not optional—it’s essential.
Designing insurance that works for women means understanding their roles, risks, and barriers. Inclusive insurance must be truly inclusive.
In India, the Mahila Housing Trust partnered with local communities to co-develop a heat index insurance product tailored to women working in informal sectors. Many of these women face lost income during heatwaves but have no safety nets. By involving women directly in the design and pilot phases, the Trust ensured that the insurance actually met their needs. Mobile technology and community-based organisations played a key role in building trust and delivering coverage effectively.
The Power of Partnerships
None of this can happen in a vacuum. Real change depends on collaboration — and some of the most promising models show what becomes possible when different actors come together. In Senegal, the Compagnie Nationale d’Assurance Agricole du Sénégal (CNAAS) operates as a public-private partnership, with the government holding 45 per cent ownership and the balance held by private actors including (re)insurers and financial institutions. This model has already delivered results — reaching more than 500,000 farmers through successful agricultural insurance pilots. Now, CNAAS is looking ahead, developing a business strategy to achieve scale and long-term sustainability. It’s a powerful illustration of what becomes possible when each partner brings something essential to the table:
This kind of collaboration isn’t limited to the national level. On the global scale, the Global Shield against Climate Risks takes the same principles further. By helping countries move from reactive disaster aid to laying the foundation for proactive pre-arranged financing solutions and expanding access to Climate and Disaster Risk Finance and Insurance (CDRFI) instruments, the joint G7/V20 initiative operates in an inclusive, multi-stakeholder model. This includes the development and scaling of inclusive insurance solutions—ensuring that vulnerable populations, especially smallholder farmers and informal workers, are better protected against climate shocks within the specific context of each Global Shield partner country. Through a combination of technical assistance, pre-arranged financing, and country-led planning, the Global Shield ecosystem strengthens national systems while also unlocking faster, more predictable payouts following disasters. This integrated approach not only reduces the long-term cost of crises but also empowers communities to invest in resilience before disaster strikes.
A Call to Action
It’s time to shift the focus—from products to people, from isolated transactions to transformative systems.
The tools to protect climate-vulnerable communities already exist. What’s needed now is the collective will to scale them, the creativity to adapt them, and the commitment to co-create solutions with those on the frontlines.
Index insurance is not a silver bullet—but it is a critical piece of the puzzle. Let’s make sure it reaches the people who need it most.
Authors:
Dr. Astrid Zwick, Head of GIZ Program, Global Shield Secretariat
Monica Odhiambo, Advisor – Engagement and Gender, Global Shield Secretariat
Hugo Fulco, Advisor – Communications, Global Shield Secretariat
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