Climate risk insurance is vital now more than ever

General Manager, Minet Risk Services (Corporate) at Minet Kenya Francis Maina. [Courtesy]

Last July, the planet experienced the second-hottest month ever recorded, setting the stage for what scientists are now categorising as the hottest year on record in 2023.

Alarming forecasts indicate the potential resurgence of the El Nino weather phenomenon in 2024, amplifying concerns about the far-reaching impacts of climate change.

In Kenya, experts are sounding the alarm, urging caution and immediate action. On August 23, 2023, Kisumu County's Climate Change Director, Evans Gichana, emphasised the gravity of the situation, stating, "Climate change portends a grim future for Kenya and is a wake-up call for all of us to take urgent action to mitigate the effects of climate change."

The effects of climate change are glaringly evident in different regions of Kenya. Northern Kenya is grappling with severe droughts, leading to the loss of both lives and livelihoods.

Meanwhile, Western Kenya is contending with devastating floods, resulting in the displacement of populations, damage to livelihoods, and the loss of valuable farmland.

These calamities have collectively contributed to a significant decline in harvests, exacerbating Kenya's struggle to feed its population and necessitating additional strain on foreign exchange reserves through food imports.

As climate-related catastrophes become more frequent, the imperative to find effective mitigation strategies intensifies, particularly solutions that facilitate the recovery of affected sectors. Climate risk insurance emerges as a key player in this endeavour.

It involves providing insurance coverage that not only addresses the immediate aftermath of climate-related disasters but also proactively meets the financial burdens imposed during such calamities, ranging from floods and droughts to earthquakes, crop failures, and livestock diseases.

Under the umbrella of climate risk insurance, insurance companies collaborate with policyholders to diminish the likelihood and severity of such events.

This is achieved by encouraging policyholders to invest in resilient infrastructure and practices capable of withstanding the impacts of climate change.

For instance, businesses may be prompted to construct structures capable of withstanding more potent storms or to install systems for managing increased water levels.

A notable example of successful climate risk insurance implementation is the Kenya Livestock Insurance Programme launched in 2015.

Operating in six counties, the program, by 2017, had disbursed a total of KSh. 494 million, crucially supporting affected pastoralists. These disbursements played a pivotal role in enabling farmers to procure essential resources, such as animal feed

- The writer is General Manager, Minet Risk Services (Corporate) at Minet Kenya