Each November, Pacific communities brace for the annual cyclone season a six-month period that tests their resilience against extreme weather. For many Pacific Islanders, cyclones and floods are more than just natural disasters; they are stark reminders of a changing climate that continues to threaten lives and livelihoods.
Ironically, the people least responsible for global emissions face the harshest consequences. Extreme weather events not only destroy homes and infrastructure but also push entire communities into poverty, stretching already debt-ridden governments to their limits. Yet, amid these challenges, the Pacific’s renowned resilience shines through.
A Region No Stranger to Disaster
The Pacific has witnessed some of the most devastating tropical cyclones in history. In 2016, Category-5 Cyclone Winston battered Fiji, affecting 62% of its population, claiming 44 lives, and causing $1.4 billion in damages. Similarly, Cyclone Harold in 2020 left over 300,000 people in Fiji, Tonga, and the Solomon Islands without basic necessities. In 2023, Vanuatu faced an unprecedented crisis as three severe cyclones struck within months, leaving behind destruction and hardship.
While disaster recovery efforts have improved over the years, a significant gap has persisted: the lack of quick and reliable financial relief mechanisms. Without appropriate pre-arranged financing, such as insurance, affected communities often struggle to rebuild and recover.
The Rise of Parametric Insurance
Recognizing this critical gap, the United Nations Development Programme (UNDP), UN Capital Development Fund (UNCDF), and the United Nations University Institute for Environment and Human Security (UNU-EHS) launched the Pacific Insurance and Climate Adaptation Programme (PICAP) in December 2020. The initiative focuses on locally-led climate risk insurance solutions, including parametric insurance tailored for Pacific Island nations.
Unlike traditional insurance, parametric insurance provides payouts based on pre-agreed triggers, such as specific wind speeds or rainfall levels. This eliminates the need for lengthy damage assessments, ensuring funds reach beneficiaries swiftly.
The impact of this innovation was evident in January 2023, when prolonged heavy rainfall in Fiji’s Western Division triggered a parametric insurance payout. While the government did not declare the event a national disaster, 535 insured individuals received timely assistance their only source of immediate relief. Among them were farmers and fishers who received payments within two weeks, allowing them to begin rebuilding their lives without delay.
Building a Stronger Climate Insurance Ecosystem
The success of parametric insurance in Fiji underscores the importance of partnerships. PICAP brings together insurers, regulators, meteorological services, cooperatives, and NGOs to create an agile and responsive insurance ecosystem.
March 2024 marked another milestone when yet another rainfall event triggered payouts to 1,700 beneficiaries, including two smallholder farmers who each received FJ$1,000 a historic moment for climate insurance in the region.
With these successes, Fiji is now set to expand parametric insurance on a national scale. The Reserve Bank of Fiji (RBF), in partnership with SUN Insurance and Tower Insurance, will lead the initiative with support from the InsuResilience Solutions Fund. This makes RBF the first central bank in the Pacific, and possibly the world, to take ownership of a national parametric micro-insurance program.
Scaling Up for the Future
Building on its success, PICAP is also piloting an Anticipatory Action (AA) insurance product that focuses on disaster preparedness. Launched for the 2023-2024 cyclone season, this initiative covers over 10,000 individuals across four cooperatives. Offering payouts of up to FJ$50,000 based on windspeed forecasts, the program will expand to 12 communities in 2024-2025, with further rollout planned in Solomon Islands and Samoa.
In a region where the next cyclone or flood is inevitable, these innovative financial tools provide a measure of certainty in uncertain times. While global climate action discussions continue, parametric insurance is already delivering economic security to those on the frontlines of climate change. Fiji’s success story proves that when locally driven solutions meet evidence-based approaches, the result is lasting and meaningful impact for vulnerable communities.