On July 6, 2023, the socialprotection.org platform hosted the webinar "Linking disaster risk financing with social protection" in partnership with the World Food Programme (WFP), the World Bank Group, and InsuResilience Global Partnership. With the moderation of Anna Carolina Machado, Social Protection Specialist at the World Food Programme, the webinar contributed to the debate on the benefits of strengthening the linkages between Disaster Risk Financing (DRF) and social protection (SP) systems. It draws from the parallel event "Climate, Disaster Risk Financing and Social Protection: the increasing role of pre-arranged financing for social protection in the Global Shield and Beyond" that took place at the Global Forum on Adaptive Social Protection on June 14th, 2023 in Berlin.
Eliseo Arauz, Programme Associate at WFP Nicaragua
Mr. Eliseo Arauz (WFP) started the presentation by explaining the linkages between DRF and social protection, as well as WFP’s portfolio in supporting the expansion of macro insurance as a risk financing instrument in different regions, including in Africa and in the Caribbean. DRF can offer social protection with faster and predictable finance; the creation of incentives and structure for ex-ante design and planning; and access to emergency resources beyond humanitarian funding. On the other hand, social protection ensures DRF a better targeting of payouts to the poor and vulnerable; quicker distribution; greater cost-effectiveness/value for money; improved design, and increased government ownership.
The presentation also focused on Nicaragua, were WFP has a growing portfolio in macro insurance and is working closely with the government to strengthen the shock-responsiveness of government systems. As part of the ongoing collaborations with the Ministry of Finance, WFP supported a premium top-up to scale-up coverage of the Caribbean Catastrophe Risk Insurance Facility (CCRIF-SPC) – a sovereign insurance product that provides macro-level financial protection against tropical cyclones. In October 2022, the country was hit by the tropical storm Julia, which triggered a CCRIF payout of US$ 8.9 millions paid to the government, out of which US$ 640.000 were channeled through WFP to support the implementation of response and recovery projects, including through social protection. As part of the response, vertical and horizontal expansions of the national school feeding programme were provided in 12 municipalities; and cash transfers combined with productive support were implemented to support 1,050 affected families in the Caribbean Cost. According to Eliseo, it is key to keep strengthening national capacities in DRF and its linkages with social protection, including continuous support in preparedness and anticipatory planning to better tackle the effects of climate change.
Figure 1: Overview of WFP's global macro insurance portfolio
Source: WFP Nicaragua presentation in the webinar
Amit Kumar Garg, Development Economist at the UN Capital Development Fund (UNCDF)
Mr. Garg (UNCDF) explored the Fiji case and the linkages between Climate Risk Insurance (at the micro level) and social protection programmes. In 2020, the government of Fiji provided one-off unconditional cash assistance to around 10.800 social welfare recipients in response to the tropical cyclone Harold. However, the response took longer than expected (approximately four months), generating delays in relief and rehabilitation. Building on these experiences, in August 2021 the government of Fiji, in partnership with UNCDF, support from the India-UN Fund and other partners, launched the first market-based climate risk parametric micro-insurance scheme for low-income households in the Pacific, as part of the Pacific Insurance and Climate Adaptation Programme. The programme also promoted the use of digital tools for easiest onboarding of clients and mobile-wallet-based payments for the quicker access to funds. As of today, the government of Fiji has its own CRI solution that provides micro insurance against tropical cyclones to social protection beneficiaries, implemented by Fiji’s Department of Social Welfare (DSW) in collaboration with local insurance providers.
Among the challenges and lessons from programme implementation, it is possible to mention the importance of data currency (such as mobile phone contact); the relevance of empowering beneficiaries through targeted awareness and education programs (driving economic inclusion); and of strengthening institutional capacities within social development ministries to implement micro insurance, especially in countries with limited social protection frameworks. Also, fiscal challenges can threaten the long-term sustainability of programmes. Within this context, Fiji adopted the Vision 2030: resilience over dependence, focusing on building resilience of low-income communities by bringing market-based climate risk finance.
Figure 2: Conceptual blocks of the product
Source: UNCDF presentation in the webinar
Evie Calcutt, Financial Sector Specialist, Crisis and Disaster Risk Finance at the World Bank
Ms. Calcutt (World Bank) presented the Social Support for Resilient Livelihoods project in Malawi, where disasters (including floods, droughts, and storms) contribute to the hush and persistent poverty and also severely impact the economy.
Figure 3: Disaster context in Malawi
Source: World Bank Malawi presentation in the webinar
Within this context, making social cash transfer programs shock-responsive is a key pillar of the government's disaster risk financing strategy. A Scalability mechanism was implemented, provided by the World Bank throughout the Social Support for Resilient Livelihoods project. Reviewing available drought data sources in Malawi, including satellite data, a framework for a triggering mechanism in drought-prone districts was developed. Nowadays, the program covers 600,000 people in six districts at the onset of drought. Malawi currently has a Disaster risk financing strategy 2018-2023: a mission to proactively manage economic and fiscal risks as well as protect public finances against disaster (partnership with the World Bank with the government of Malawi). Among the lessons learned in this case: strong government ownership is needed, pre-established rules and financing help speed response, and the importance of investing in delivery systems.
If you are interested to know more about this subject, Ms. Calcutt suggested reading the in-depth publication "Using Disaster Risk Financing to Build Adaptive Social Protection in Malawi".
Jennifer Phillips, Advisor at InsuResilience Global Partnership
Ms. Phillips (InsuResilience) presented the Global Shield, an initiative launched at COP-27 that provides a systematic, coherent, and sustained approach to financial protection. The Global Shield works to support the most vulnerable countries to have more and better pre-arranged and trigger-based financial protection against climate and disaster-related losses, especially through risk transfer products (money-in systems), as well as to strengthen national systems and programmes that can serve as mechanism to deliver financial assistance and support to shock-affected households (money-out mechanisms) - including thought social protection systems.
Among other areas of work, the Global Shield is currently providing support to countries in policy reforms, capacity strengthening, premium financing and in building early warning systems for anticipatory action. Further details about the Global Shied are available on their website.
Lastly, the webinar concluded with a brief Q&A discussion, that focused on the main question raised by the audience. The question discussed the importance of assessment, monitoring, and evaluation of the processes and questioned how countries can create and leverage evidence to apply to financing opportunities such as the opportunity provided by the Global Shield.