Tackling climate change and social protection by growing insurance and risk finance
August 29, 2022
The United Nations Development Programme (UNDP) has today unveiled an initiative, financed by Germany, to engage the Government of United Republic of Tanzania on risk finance and insurance while working with the private sector to lay the ground for future insurance solutions for helping the tackling of climate change, growing the economy and reducing vulnerability and poverty. The announcement was made at the 44th Annual Conference of the Organisation of Eastern and Southern African Insurers, which is currently taking place in Zanzibar.
Within three years, the Engagement Initiative aims to build a conducive environment for the development of insurance and risk transfer products that build financial resilience and reduce vulnerabilities to climate, socio-economic, health and disaster risks and shocks. UNDP will work to build the capacity of the Government to manage financial risks, and together with national industry partners, reduce barriers that prevent the growth of the insurance and risk finance sector in the country.
Affirming the Government of United Republic of Tanzania’s commitment to insurance and risk finance, Deputy Permanent Secretary, Ministry for Finance and Planning, Lawrence Mafuru said: “UNDP’s Engagement Initiative complements the Government of United Republic of Tanzania's prioritisation of strengthening resilience through insurance and risk finance. In addition to Tanzania being one of the first Engagement Initiative countries, the government will soon endorse its National Insurance Policy 2022 and its implementation strategy plan, which envisions a vibrant and sound insurance industry contributing significantly to consumer protection, financial stability, and economic growth.”
Recognizing the importance of the private sector as the engine of growth, Commissioner of Insurance of Tanzania Insurance Regulatory Authority, Saqware Baghayo pointed out: “Pursuing the vision of a vibrant insurance industry, the Government of United Republic of Tanzania endeavours to create an enabling environment for an inclusive, efficient, and stable insurance industry in both the mainland and Zanzibar. UNDP’s Engagement Initiative will greatly support the efforts to establish such an enabling environment.”
United Republic of Tanzania has a high risk of disasters, such as earthquakes, drought, strong wind, flood, and fire, with 363 disasters recorded between 2000 and 2020. For instance, droughts affect one in 10 residents and impact 12 percent of the gross domestic product, which is an equivalent loss of US$5.6 billion per year. According to the World Food Programme, the country also faces the risk of higher temperatures and uncertainty during the rainy season due to climate change, with recurrent floods and droughts that will affect the production and suitability of crops and livestock throughout the country.
Underlining the importance to integrate insurance and risk finance into national development policies and delivery, UNDP Resident Representative Christine Musisi noted: “Insurance and risk finance are powerful levers for stabilizing progress and economic growth, as well as reducing poverty and inequality and creating and safeguarding decent livelihoods. While individual insurance products, tools and services can build the resilience of families and communities, the integration of insurance and risk financing into development planning, processes, and strategies is necessary to deliver the Sustainable Development Goals, and safeguard development gains.”
The Engagement Initiative is designed to upscale risk finance and insurance in countries by a research and evidence-driven approach to support changes in legislation and regulation of the insurance sector, allowing the development of new products, tools, and services while working with the private, mutual, and cooperative sectors. Alongside this, investments are made in the Ministry of Finance’s capacity to better manage financial risk.
German Parliamentary State Secretary to the Federal Minister for Economic Cooperation and Development Bärbel Kofler highlighted: “Climate change is already a dramatic reality leading to losses and damages by which the most vulnerable countries are worst affected. In order to increase the protection against climate risks for poor and vulnerable people and countries, Germany has initiated the Global Shield against Climate Risks, which was endorsed by the G7. Against this background, we strongly welcome the start of the Engagement Initiative as a crucial contribution to the Global Shield.”
United Republic of Tanzania is the first country where the Engagement Initiative is being started. The initiative will run in at least another four countries, which are least developed or recently graduated from the status by the end of 2023, with the plan to expand the initiative to 15 countries at a later stage. The Engagement Initiative is an important part of UNDP’s Insurance and Risk Finance Facility, which is working to deliver innovative insurance and risk transfer solutions in partnership with industry in a minimum of 50 developing countries by 2025.