Impact Evaluation of Climate Risk Insurance Approaches

Following the launch of the InsuResilience Initiative in 2015, interest in climate risk insurance (CRI) as a means to strengthen climate resilience in developing countries has increased substantially – as have the number of voices calling for impact evaluations that identify and assess the ways in which CRI affects resilience.

If applied prudently and embedded into a wider, comprehensive risk management approach, CRI can make substantial contributions. Far from only strengthening agricultural production and agricultural strategies, it can help increase the ‘three key capacities of climate resilience’ (Anticipate, Absorb, Adapt): On the one side, CRI can increase anticipatory capacities, for example by catalyzing climate risk assessments, and thereby create awareness and sensitize for climate risks. On the other side, CRI strengthens the absorptive capacities – due to its most prominent function, the provision of timely pay-outs, CRI improves financial liquidity and prevents the resort to negative coping stratgies in the event of natural disasters. And, last but not least, CRI builds the adaptive capacities by spurring long-term behavioral change and creating securer economic framework conditions that incentivize adaptation investment.

The objective of this paper is the development of an Impact Evaluation Framework that is responsive to this application context. As our featured review of currently existing impact evaluations reveals, many of those suffer from a ‘resilience gap’: Most evaluations assessing the impact of climate risk insurance solutions concentrate only on the short term and focus predominantly on effects pertaining to agricultural production and related shifts in strategy. They, however, concentrate less on how climate risk insurance influences shock management strategies and wellbeing levels in the short as well as the long term.

Against this background, this paper proposes an innovative framework to close the resilience gap when measuring the impact of climate risk insurance at the micro-level, concentrating on the household as the main unit of analysis. Using a resilience lens and the 3A capacities approach introduced in the BRACED resilience study, this Framework aims to identify and categorize the effects of insurance according to their influence on the anticipative, absorptive and adaptive capacities of households. The integrated framework is based on subjective and objective measures with a multi-dimensional index, which is both methodologically rigorous as well as feasible for the implementation context, and can be replicated in different settings.

Together with our partner, the LSE Grantham Institute on Environment and Climate Change, we are now initiating the process of testing and further refining the approach by applying the framework in the context of three case studies. We are delighted to make this contribution to the ongoing efforts around climate risk insurance and will keep you updated on the progress of our work. 

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