Finance and disaster management ministers from G20 nations have reiterated the urgent need to strengthen disaster risk reduction (DRR) frameworks, calling for wider use of innovative risk financing tools such as parametric insurance and catastrophe bonds to address escalating climate risks.
During recent G20 discussions, ministers acknowledged that the increasing frequency and severity of natural disasters—driven by climate change, urbanisation, and environmental degradation—are placing significant pressure on public finances, insurance markets, and vulnerable communities. They stressed that disaster risk reduction should move beyond post-event relief and become a core component of economic planning and development policy.
The ministers highlighted parametric insurance as a critical instrument for improving disaster preparedness and response. Unlike traditional indemnity-based insurance, parametric solutions enable faster payouts triggered by predefined parameters such as rainfall levels, wind speed, or seismic intensity. This allows governments and affected communities to access funds quickly after disasters, supporting rapid relief and recovery efforts.
Catastrophe bonds were also identified as an important mechanism for transferring disaster risks to global capital markets. By enabling investors to absorb specific disaster risks in return for higher yields, cat bonds help governments diversify funding sources while reducing fiscal shocks from extreme events.
G20 members underlined the importance of strengthening public–private partnerships, enhancing data and modelling capabilities, and expanding insurance coverage in developing and climate-vulnerable regions. They also emphasised the need to integrate DRR strategies with broader climate adaptation and sustainable development goals.
The discussions reflect growing global consensus that effective disaster risk financing—including insurance, reinsurance, and capital market instruments—is essential for building long-term resilience. G20 ministers reaffirmed their commitment to supporting international cooperation and capacity building to ensure that disaster risk reduction frameworks are inclusive, scalable, and financially sustainable.
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