High-level inter-ministerial workshop held in Hanoi June 6-7, 2017 hosted by the Ministry of Agricultural Development (MARD) of Viet Nam and supported under the Integrating Agriculture in National Adaptation Plans (NAP-Ag) Programme. The meeting was attended by over 75 national and provincial level government officials, including MONRE, MARD, MPI and the Ministry of Finance (MOF), UN and development partners, private sector representatives including insurance companies, as well as non-governmental organisations.

1. International climate change
frameworks related to managing the
financial costs of climate change and
global good practice in managing
climate related financial risk
Sönke Kreft

2. Introduction:
6 June 2017 2
• Munich Climate Insurance
Initiative (www.climate-
insurance.org)
• Launched in 2005
• Non-profit organisation
• Includes member from
private sector, academia and
civil society
• Mission: Advancing climate
risk management for the
most vulnerable through
insurance linked approaches
• Hosted at United Nations
University – Institute of
Environment and Human
Security

3. Rationale: Natural disasters on the rise
3
MunichRe (2017)
6 June 2017

4. Rationale: Developing countries highly affected
4
Worldbank (2014) based on
SwissRe Data
Munich Re in
Worldbank (2014)
6 June 2017

5. Rationale: Viet Nam among most impacted countries
5
Germanwatch, 2016
• No. of climatic events on the
rise
• Developing countries most
impacted and by large
account for increases in
global losses
• Specific exposures of Viet
Nam – one of the most
affected countries globally
6 June 2017

6. Rationale: Climate change – observed impacts/future risks
8/28/2017 6
IPCC, WG II Technical
Summary (2014)
IPCC, WG I Summary for Policymaker (2013)

7. Rationale: Public balance sheet & climatic risks
7
Liabilities Direct: obligated in any
event
Contingent: Obligated in
particular events
Explicit
Government liability
(contractual or by law)
Foreign and domestic
public creditors;
expenditures by budget
laws and budget
expenditure
State guarantees for non-
souveraign borrowing,
public and private sector
entities, reconstruction of
public infrastracture
Implicit
A ‘moral‘ obligation of the
government
Future recurrent costs of
public investment projects,
pension, health care
expenditure, general
safety nets
Default of subnational
government, public and
private entities. Specific
disaster relief including for
the most vulnerable
Expanded from Mechler and Hochrainer-Stigler, 2014
Solution. Good public financial
climatic risk management
Adaptation planning &
investments
Climatic shocks increasing
public financing costs
Damaged key
infrastructure
Post disaster aid
6 June 2017

8. Rationale: Integrated Climate Risk Management Cycle
8
building
back
better
risk
analysis pre-
vention
ex-ante
financing
prepared-
ness
response
ex-post
financing
recovery
RESILIENCE
Residual risk
This phase includes: (i) Arranging the required
financial resources for the government to meet its
contingent liabilities (ii) Developing catastrophe risk
and agricultural insurance markets, building on Public-
Private Partnerships (iii) Develop rules and arrange
financing instruments for scalable social protection.
Recover
This phases comprises the reconstruction
and recovery policies and ex-ante design of
institutional structures. This requires strong
learning, monitoring and evaluation
Prepare
This phase ensures effective post disaster
response and recovery by pre-arranging and
coordinating institutions with sufficient and
timely resources to provide access following
a disaster event.
Prevent
This phase risk assessment for financial
protection quantify potential disaster impacts
based on historical and simulated data. This
often requires investments in the necessary
underlying hazard, exposure, and vulnerability
data. This also includes the policy makers and
building an effective risk communication interface
to set priorities and risk reduction measures.
Concrete measures include for example
inventories of public exposures to climatic risks
Respond
This phase consist of activating all emergency measures
in the residual risk and prepare phases. This includes
early warning and actions aimed at saving lives and
minimising further financial loss after a disaster.
6 June 2017

9. Rationale: A risk layering approach
96 June 2017 MCII and GIZ, own design, elaborated from World Bank (2011)

10. Practice: Good decision making
106 June 2017

11. Practice: FONDEN – Mexicos subnational disaster management
116 June 2017

12. Practice: Regional insurance pooling – the African Risk Capacity
126 June 2017

13. Frameworks: Sendai Framework & UN SDGs
• Sendai Framework: International governance of Disaster Risk Reduction 2015-
2030
• Indicators: Reduction in global disaster mortality, No. of affected peoples,
economic losses, No. of countries with DRR strategies, global cooperation
(incl. support), availability of multi-hazard early warning systems
• Sendai Priorities: Understanding disaster risks; Strengthening disaster risk
governance; Investing in resilience; Enhancing disaster preparedness and to
“Build Back Better” in recovery, rehabilitation and reconstruction. Financial
risk management included across the priorities.
• UN Sustainable Development Goals. Mainstreaming Resilience
136 June 2017

14. Frameworks: UNFCCC Adaptation and Loss & Damage
• Paris Agreement: Major multilateral success of 2015 to achieve first global
climate agreement
• Includes mitigation, adaptation and climate finance goals
• Builds on Nationally Determined Contributions (NDCs) to be implemented
and increased collectively in 5 year cycle through Global Stocktake
• Establishes commitments of conduct and cooperation on adaptation
(Article 7) and Loss & Damage (Article 8).
• Post-Paris: Paris agreement entered into force (October 2016)
• COP 23 & 24: Establish the ‘Rule book‘ of the Paris Agreement (including
provisions on transparency, process of the Global Stocktake, low emission
development strategies)
146 June 2017

15. Rationale: Integrated Climate Risk Management Cycle
15
building
back
better
risk
analysis pre-
vention
ex-ante
financing
prepared-
ness
response
ex-post
financing
recovery
RESILIENCE
Residual risk
This phase includes: (i) Arranging the required
financial resources for the government to meet its
contingent liabilities (ii) Developing catastrophe risk
and agricultural insurance markets, building on Public-
Private Partnerships (iii) Develop rules and arrange
financing instruments for scalable social protection.
Recover
This phases comprises the reconstruction
and recovery policies and ex-ante design of
institutional structures. This requires strong
learning, monitoring and evalutation
Prepare
This phase ensures effective post disaster
response and recovery by pre-arranging and
coordinating institutions with sufficient and
timely resources to provide access following
a disaster event.
Prevent
This phase risk assessment for financial
protection quantify potential disaster impacts
based on historical and simulated data. This
often requires investments in the necessary
underlying hazard, exposure, and vulnerability
data. This also includes the policy makers and
building an effective risk communication interface
to set priorities and risk reduction measures.
Concrete measures include for example
inventories of public exposures to climatic risks
Respond
This phase consist of activating all emergency measures
in the residual risk and prepare phases. This includes
early warning and actions aimed at saving lives and
minimising further financial loss after a disaster.
6 June 2017

16. Frameworks: UNFCCC Adaptation regime
• Adaptation: Article 7 of the Paris Agreement
• Discussions in 2017 & 2018:
• Adaptation needs assessments in developing countries; approaches to
showcase adaptation in developing countries; clarifying the role of
adaptation in the Globale Stocktake (including operationalization of the
Global Adaptation Goal); undertaking a review of the adaptation related
UNFCCC governance
• COP 23: Determining best guidance for adaptation communication
• National: Implementation of National Adaptation Plans & NDCs
166 June 2017

17. Frameworks: UNFCCC Loss & Damage debates
• Loss & Damage: Article 8 of the Paris Agreement
• Anchors the Warsaw International Mechanism and promotes areas of
cooperation
• Establishes Clearing House for climate risk transfer and Task force for
climate related displacement to agree on international guidance
• Warsaw Mechanisms 2015-2017: Work on comprehensive risk
management & resilience; Forum on loss & damage finance in Manila 5/6
September 2016; slow-onset events & non-economic loss and damage
• COP22: National - Invitation to assign national risk officers for L&D
• COP23: 5 year work-plan of the WIM and operationalization of Clearing
House for climate risk transfer
176 June 2017

18. Frameworks: From G7 to G20
• G-7 Insuresilience – Objective to insure 400 million people against climatic
shocks until 2020
• Established by G7 Partner countries at Elmau summit in 2015
• G7 Pledges (so far): > USD 500million
• Rapid Action Package: Scaling up of ARC, CCRIF, PCRAFI
• A G-20 Partnership on climate risk insurance in July 2017?
• Call by V-20 towards G-20
• Potential outcome: Establishment of global partnership to enable
countries to improve their financial climate risk management
186 June 2017

19. Thank you
Sönke Kreft
Executive Director - Munich Climate Insurance Initiative
Associate Academic Officer
UNITED NATIONS UNIVERSITY
Institute for Environment and Human Security (UNU-EHS)
kreft@ehs.unu.edu
twitter: @soekreft @_MCII_
www.climate-insurance.org
196 June 2017