As climate impacts intensify, insurance can enable urgently needed investment in adaptation and resilience. Adaptation finance – which aims to help people, businesses and countries build resilience to the impacts of climate change - reached an all-time high of US$65 billion in 2023 (GLCF 2025). Despite this progress, financing for adaptation and resilience falls far short of the annual US$215-$387 billion needed by 2030 in developing economies alone.  

Insurance holds immense potential to strengthen resilience and de-risk climate investments. Natural catastrophe losses reached USD 280 billion in 2023, with only USD 110 billion insured leaving around 60% of losses uninsured. The protection gap is even wider in Asia (85%), Latin America (80%), and approximately 70% in Africa, the Middle East, and parts of Europe, leaving these regions highly vulnerable (BIS). 

At London Climate Action Week in June, a roundtable on De-Risking Investment in Climate Adaptation and Resilience, hosted by UNDP, GARI Group, Pollination and Zurich Insurance Group explored how better alignment between insurers and investors can unlock scalable climate resilience, and the crucial role of government policies and regulatory frameworks in supporting these efforts. 

Aligning Investors and Insurers  

Investors typically think in 5-to-15-year horizons (e.g. aligned with climate-resilient infrastructure) whereas the insurance sector operates in 12-month underwriting cycles. This can make it difficult to design insurance solutions that align and support long-term climate adaptation efforts. For scalable investment in resilience and adaptation, the regulatory environment has a critical role to play in making both investment and insurance capital work together. Without this alignment, solutions remain fragmented and fail to achieve meaningful scale. This mismatch in timeframes also leads to a deeper disconnect in how each sector perceives and prices risk. Insurers focus on risk avoidance or immediate transfer. Investors, on the other hand, are more focused on risk-adjusted returns over decades. This creates a blind spot where many promising climate adaptation projects, especially in developing countries, are considered too risky to insure and therefore too risky to invest in. The result is a paralysis in capital flows to resilience-building infrastructure that desperately needs both. 

Bridging the gap between insurers and investors is not just a technical challenge; it is a strategic imperative for scaling climate resilience. Effective collaboration requires mutual understanding, trust and alignment of incentives. By creating shared spaces for dialogue and innovation, stakeholders are beginning to overcome traditional silos and engage in meaningful discussion to understand each other's risk appetite, capital constraints and long-term objectives. As a result, joint policy development design sessions, pilot project collaborations, and cross-sector working groups are emerging to unlock new pathways for climate adaptation finance.  

Building Domestic Insurance Markets and Regulatory Frameworks 

Up to 90 percent of people in low-income countries lack any form of insurance protection, which severely limits their ability to recover from and prepare for climate-related disasters. A key challenge lies in strengthening domestic insurance markets and regulatory environments to support more effective risk pooling and coverage. Governments play a pivotal role in building the foundations for climate resilience through stronger insurance markets. Expanding or strengthening insurance markets especially in developing countries can unlock the insurance sector’s risk management and investment-enabling capabilities, contributing to resilient development outcomes and support progress toward the SDGs.  

In many countries, regulations require that a portion of risk be retained locally, creating a need for licensed insurers and brokers capable of managing that risk. This builds domestic risk management capacity and retains a share of insurance premium flows within national economies. One example is the Flood Risk Insurance initiative in Lagos State, Nigeria. Through the Tripartite Agreement between UNDP, the Insurance Development Forum and the German Government, the Lagos State Government has developed a tailor-made flood insurance product to address the city’s specific urban climate vulnerabilities. In line with Nigerian regulation, 25.45 percent of the risk will be retained domestically. The project was designed by the tripartite project through a consortium of insurance companies, bringing together local underwriters and intermediaries to retain part of the risk domestically. The remaining exposure was transferred to international reinsurers, enabling a balanced approach to local retention and global risk-sharing. 

The pool of domestic insurers that has emerged is expected to strengthen the national insurance market over time and help embed resilience at the local level. The Lagos State Government has embedded a dedicated budget line to subsidize the government’s share of the premium. This will help attract private sector participation and lay the foundation for long-term sustainability. This example shows how regulation, combined with strong public-private collaboration and technical support, can drive innovative insurance solutions that meet local climate adaptation needs while also strengthening domestic insurance markets. 

Above all, this is a partnership agenda  

Bridging the climate resilience gap requires more than capital. The roundtable highlighted the value of strong partnerships between investors and insurance providers in facilitating the creation of urgently needed innovative financial tools. These tools include multi-year risk guarantees and resilience bonds that combine immediate protection with long-term support for communities adapting to climate change. Regulation has a critical role to play, and investors must be encouraged to consider insurance as part of their planning from the beginning, but equally important is the need for both sectors to develop a common understanding of climate risks to inform decision making. This shared understanding is reliant on accessible climate data and alignment on both reporting standards and climate scenarios. 

As we approach COP30 in Belém, Brazil, UNDP is committed to forging new pathways for governments, regulators, insurers and investors to build robust domestic insurance markets, mobilize insurance-linked investment and scale up climate finance.  

Explore further insights from the roundtable on De-Risking Climate Adaptation Investment: Building Resilience Investment Frameworks for an Unavoidable Future here: https://pollinationgroup.com/global-perspectives/de-risking-climate-adaptation-investment-building-resilience-investment-frameworks-for-an-unavoidable-future  

Author: Shamiso Ruzvidzo, Partnerships Specialist, UNDP Insurance and Risk Finance Facility