Public sector

Natural disasters already cost the global economy more than USD 300 billion on average per year as well as having a major impact on people’s well-being. Much of this burden falls on the public sector and the fiscal impact on a government’s budget can be sizeable. The combination of climate change, a growing population and increasing exposure of assets will amplify this catastrophic impact.In the face of natural disaster risks, sovereign and sub-sovereign entities are increasingly moving towards a proactive approach using parametric insurance. This type of insurance uses natural hazard parameters to trigger fast payouts, providing a quick, flexible and transparent disaster risk financing solution.To build resilience and contribute to sustainable and inclusive economic development, AXA Climate provides parametric insurance solutions to all levels of governments, working closely with international institutions such as the World Bank and the United Nations through the Insurance Development Forum. AXA Climate can support in the modelling, design and establishment of such solutions and already acts as a lead reinsurer and technical advisor for many of the major Public-Private Partnerships covering natural catastrophe risks such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF), the Pacific Catastrophe Insurance Company (PCRIC) and the African Risk Capacity (ARC).

The agriculture sector and the global food system can be severely impacted by climate-related risks especially in developing countries. Climate change will likely increase these risks with significant reductions in yield projected in the coming decades. Public sector support is needed to protect farmers, with insurance one of the key instruments.AXA Climate works with governments and international institutions in designing climate insurance schemes that build farmers’ resilience as well as supporting the largest agriculture programmes globally. These use parametric triggers based on weather parameters from weather station or satellite data as well as area-based yield indices based on crop cutting experiments. Partners include the World Bank’s Global Index Insurance Facility with whom AXA has an MoU, the West African Development Bank and the World Food Programme.

Local and national governments face the complex challenge of understanding the impact of various climate change scenarios on their economies and populations and putting in place effective adaptation strategies to manage and reduce this risk. These adaptation plans require a long-term and system-wide perspective that take future uncertainty into account and give flexibility. Getting it wrong could be very costly.

AXA Climate can provide government entities at all levels with the quantitative decision-making tools to successfully achieve their local and national adaptation objectives. This is done by modelling current climate risk and exposure for example for a city or for a country’s agriculture sector and projecting this forward to determine potential future risk under various climate change and exposure growth scenarios. Adaptation measures, such as resilient infrastructure and nature-based solutions, can then be compared based on their relative benefit in reducing the risk and their cost.