Germany is focusing on a “global shield” to help communities in poor and vulnerable countries recover faster from climate disasters.
It aims to repair flaws in the humanitarian system, which could deliver aid after disasters like drought or storms but slowly and patchily. Instead, the German government wish to improve insurance and social security schemes to ensure that support comes fast and systematically.
Critics say the initiative is rich countries’ latest attempt to avoid paying for climate damage by continuing to keep the responsibility on individuals in poorer countries through insurance costs.
German chancellor Olaf Scholz told ministers assembled for the Petersberg Climate Dialogue in Berlin on Monday “you want to establish a global shield against climate risk”.
“We should acknowledge that there is climate-related loss and damage which the most vulnerable countries, particularly, need our solidarity in working with it,” said German development state secretary Jochen Flasbarth. “This is where we want to build bridges for that upcoming global climate conference in Egypt by putting forward concrete solutions.”
In an argument, the German development ministry BMZ said: ” If there is no protection scheme in position, a drought can mean that a smallholder farmer loses not only her harvest but additionally her entire livelihood because she cannot afford to buy new seeds.”
On the other hand, “when a preparedness and protection scheme is within place which kicks in automatically when it comes to a crisis, money for new seeds is instantly available and damage is restricted. That's much cheaper in the long run than having farmers slip into poverty,” BMZ said.
Germany is working on the global shield using the V20 group of countries that are highly susceptible to global warming. The German-hosted G7 agreed in principle to aid this idea and details are likely to be announced at Cop27 in Egypt in November.
According to some source with understanding of discussions, the German government really wants to work initially with 5-10 vulnerable “pathfinder” countries to recognize climate risks and needs and link the crooks to existing funding instruments like the Insuresilience Solutions Fund (ISF) and the Global Risk Financing Facility (GRFF). The ISF is funded by Germany’s state development bank KfW and the GRFF is co-funded by Germany, the UK and the World Bank.
The money goes towards areas like insurance, risk pooling and strengthening social home security systems. Risk pooling happens when several government entities pay money right into a pot that they can draw from when disaster strikes.
No additional finance has been dedicated to these facilities included in the global shield. In 2023, the ISF spent EUR6.9m ($7.0m) co-funding insurance costs and the GRFF spent $203m.
Campaigners told Climate Home that insurance coverage is inaccessible to a lot of of the world’s poorest and only covers certain kinds of climate disasters.
They expressed fears the global shield would be a distraction from establishing the dedicated loss and damage finance facility which low and middle-income countries are demanding and rich ones are blocking.
Roseline Isata Mansaray, the founding father of Fridays for Future Sierra Leone, told Climate Home that insurance in Sierra Leone, among the countries ISF works in, was accessible simply to those who are “rich and middle class”.
“If, for you to have your everyday bread is very difficult for you, how's it going ever likely to feel like insurance is something will pay?” she asked.
Even with the money, Climate Action Network’s Harjeet Singh added that some older and marginalised people can find it difficult to complete the forms, setup the financial institution accounts and deal with the officials necessary to arrange insurance and then claim a pay-out.
While the global shield promises to subsidise some payments, Singh questioned whether rich countries would still provide these subsidies indefinitely because the climate worsens, disasters become more frequent and insurance costs rise. Otherwise, he explained, the cost would quickly spread to the people and governments in poorer countries.
And insurance providers often shell out far less than the real costs from climate disasters. When Hurricane Maria hit Dominica in 2023, the financial costs were estimated at $1.4bn however the Caribbean Catastrophe Risk Insurance facility paid out just $0.02bn.
“The German government loves insurance because [Germany has insurance companies like] Munich Re,” Singh said. “They see a lot of opportunities of promoting insurance towards the developing world in which the penetration is very low.”
Stockholm Environment Institute researcher Zoha Shawoo asserted insurance only works best for sudden disasters like storms, droughts and wildfires and never slower ones like desertification and sea level rise. Additionally, it doesn’t cover non-economic losses such as the losses of cultures, that is hard to place a price on.
Germanwatch researcher David Ryfisch told Climate Home the global shield was “just an initiative” at this stage. He said: “The ideas behind it are great but because long because it isn't backed by finance, it risks disappointing the developing countries that are anyway already cautious regarding how much the shield can perform and whether it's meant to be a distraction using their loss and damage finance ask”.
