Climate Justice: Inverted Global Shield Insurance the Climate Loss & Damages

The document examines the Global Shield (GS) and other climate insurance initiatives in Africa, arguing that they are insufficient substitutes for a well-funded Loss and Damage Fund (LDF). It highlights systemic failures in parametric insurance, such as 'basis risk' and the inability of poor populations to afford premiums, while critiquing the technocratic and paternalistic nature of these schemes. The authors conclude that insurance should only be a complementary tool, and that equitable climate finance must be based on historic emissions rather than market-based premiums.

• The Global Shield (GS) is an insurance-based initiative designed to provide "pre-arranged" finance that can be disbursed quickly after disasters, but it differs from the Loss and Damage Fund (LDF) by requiring beneficiaries to pay a significant portion of their own protection costs rather than relying on transfers from historical polluters.
• Parametric or 'index' insurance, widely used in Africa, faces the problem of 'basis risk,' where payouts are not triggered despite severe losses because the proxy variables used in the model do not reach the required threshold. A notable example occurred in Malawi in 2016, where a lethal drought failed to trigger payouts from the African Risk Capacity (ARC) due to errors in the model's reference crop data.
• Climate insurance is poorly suited for 'slow-onset' climate vulnerabilities, such as heat stress for workers, the gradual erosion of cocoa production in West Africa, and intensified conflicts over water access, which require infrastructure improvements and social protection rather than disaster-response insurance.
• Low enrolment in African climate insurance schemes is driven by the fact that the most vulnerable populations and countries are often unable to afford premiums, necessitating donor subsidies to maintain viability. This is exacerbated by financial distress in African countries caused by the pandemic, the Russian invasion of Ukraine, and anti-inflation measures.
• The design of climate insurance programmes is often highly technocratic and paternalistic, excluding affected communities from decision-making and relying on external actuarial expertise and software, which limits democratic control and ownership by African governments.
• Parametric insurance schemes in Africa have created a stream of rents for European financial institutions, particularly reinsurers, as premium income is ceded to these entities while claims often fail to meet the threshold for reinsurance payouts.

APA

Bernards, N., & Mbungu, G. (2024). Climate Justice: Inverted Global Shield Insurance the Climate Loss & Damages. Africa Policy Research Institute. https://afripoli.org/climate-justice-inverted-global-shield-insurance-the-climate-loss-damages

Chicago

Bernards, Nick, and Grace Mbungu. Climate Justice: Inverted Global Shield Insurance the Climate Loss & Damages. Africa Policy Research Institute, 2024. https://afripoli.org/climate-justice-inverted-global-shield-insurance-the-climate-loss-damages.

Wikipedia

{{cite report |last1=Bernards |first1=Nick |last2=Mbungu |first2=Grace |title=Climate Justice: Inverted Global Shield Insurance the Climate Loss & Damages |publisher=Africa Policy Research Institute |date=19 February 2024 |url=https://afripoli.org/climate-justice-inverted-global-shield-insurance-the-climate-loss-damages |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernards2024climate, author = {Bernards, Nick and Mbungu, Grace}, title = {{Climate Justice: Inverted Global Shield Insurance the Climate Loss \& Damages}}, institution = {Africa Policy Research Institute}, year = {2024}, month = feb, url = {https://afripoli.org/climate-justice-inverted-global-shield-insurance-the-climate-loss-damages}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }