Action Pledge 2
Market-based risk financing mechanisms such as index insurance, microinsurance, etc., have the potential to play an important role in reducing vulnerability and building resilience to climate change impacts. A number of important initiatives have demonstrated great potential, but also a number of challenges before they can provide an inclusive, sustainable mechanism that can be applied at a large scale and contribute to climate change adaptation. This research initiative will establish an evidence base on the social impacts of microinsurance, index insurance, and other related market-based risk financing on poor households and their risk management strategies. The initiative aims to provide all Parties, particularly developing countries, with an improved understanding of what insurance can and cannot do in relation to climate change adaptation and enable them to make informed decisions on climate risk financing and measures to invest that would contribute to the climate resilience of the poor.