Last November, representatives from all over the world gathered in Sharm-el-Sheikh, Egypt, for COP27. Dubbed the ‘African COP’, the conference was under pressure to finally implement pledges and commitments to support African countries to tackle the impacts of climate change. One of the big announcements was the ‘Global Shield Against Climate Risks’, an initiative spearheaded by the German government and the V20 group. In this interview, APRI discusses the Global Shield initiative and explores its potential benefits, limitations, and implications for climate action and sustainable development with Dr. Nick Bernards, Associate Professor of Global Sustainable Development at the University of Warwick, UK.

The interview was conducted by Dr. Grace Mbungu, Senior Fellow and Head of the Climate Change Program at APRI. The responses have been edited for clarity.

Dr. Grace Mbungu

You have written extensively about the complexity and limitations of past and current development and climate actions, including climate insurance initiatives. For those who may not be familiar with the Global Shield initiative, what is it and what are its potential benefits and limitations?

Dr. Nick Bernards

The ‘Global Shield Against Climate Risks’ is an initiative jointly launched by the German government and the ‘V20’ grouping of climate-vulnerable countries at COP27 in Sharm-el-Sheikh, Egypt. Many of the initiative’s details are yet to be confirmed, but we can highlight a few key points:

Based on my own research and that of others, I am sceptical about the merits of insurance here. To have an insurance scheme, someone needs to pay premiums into a pool, which compensates members who suffer specified damages. This process raises at least two immense problems.

The first is: Who pays? This is partly an ethical and a political question -- is it just for the people, communities, and states in the Global South who have contributed least to the climate crisis to be asked to pay to protect themselves against the consequences?

It is also partly a pragmatic question that has dogged past efforts to promote insurance against climate risks. Household- and business-level insurance schemes for the poorest have been promoted by the World Bank and others as a response to climate risks for the last quarter century. In practice, these schemes have struggled to get poor people to sign up. The affordability of insurance premiums for small farms and workers with irregular and precarious incomes has been a major reason. Existing schemes remain heavily reliant on public subsidies.

National-scale insurance schemes face similar problems. For instance, the African Risk Capacity (ARC) was launched in 2014 by the African Union (AU) in collaboration with the World Food Programme and the UK. ARC makes payments to fund a pre-planned disaster relief scheme whenever a complex statistical model based on satellite data, dubbed ‘Africa RiskView’, suggests that countries are at a high risk of famine. It has proven difficult to enrol countries into ARC. In 2021-22, a new high of just thirteen countries (out of 54 members of the AU) signed on to ARC. There is some debate about why that is, but the fiscal constraints facing many African governments are unquestionably part of the problem. In partial recognition of this issue, ARC launched a service called ‘ARC Replica’ in 2018, in which donors partially match premiums paid by member governments. But even with this additional support, take-up remains low.

It is not clear yet who will pay for insurance under Global Shield. But, judging by the size of the financial commitments announced thus far, it seems fair to say that major donors do not intend to pay for all of it. However, some form of premium support from donors will be a minimum condition for Global Shield to get off the ground. This is especially true given the escalating debt burdens currently faced by many developing countries. Yet, even with premiums partially subsidised by donors, the experience of ARC and of individual and household-level schemes over the last couple of decades is not promising. Equally, it’s unclear why affected countries should have to pay at all. Asking the people who have contributed the least to global greenhouse gas emissions to pay for protection from the effects of those emissions is precisely the inverse of most visions on climate justice.

Another problem centres around the kinds of damages covered. Almost by definition, insurance cover protects against singular, discrete, and rare events – a hurricane, a flood, a drought. There is no doubt that these kinds of extreme weather events are becoming more frequent and deadlier. In itself, this increase is a problem for insurance-based approaches. As severe weather events become more frequent, they become less viable to insure.

But extreme events are also not the only form that climate damage takes. For many vulnerable people across much of the Global South, climate breakdown looks like the gradual loss of suitable growing conditions for key crops, unpredictable annual rains, unstable access to water, or increased exposure to heat at work. These climate harms are real and already often deadly. But they do not always or often constitute distinct insurable events.

Some prospective components of Global Shield could potentially address this issue. For instance, the concept note includes reference to expanded support for social protection programmes alongside insurance. There is little elaboration about what, specifically, this expansion might entail. And the amount of funding committed so far is not promising. However, redistributive cash transfers, expanded health care systems, and decent social housing (all of which might conceivably fall under the heading of ‘social protection’) would be key components of any meaningful response to the slow, grinding forms of climate loss.

So, to sum up, Global Shield is an initiative aimed at addressing climate hazards primarily through the development of new insurance schemes at different scales across the Global South. There are reasons to be concerned about the possible efficacy of Global Shield based on the prior experience of promoting insurance against climate risks in the Global South. Some of this concern could be attenuated through a clearer emphasis on social protection and more meaningful funding commitments from donor governments. But it is not clear that insurance mechanisms are really the right instruments to be using here.

Dr. Grace Mbungu

COP27 was billed as the implementation COP. In your view, where does this initiative sit in the context of the Global South countries’ COP27 priorities and demands? And how is it different from say a dedicated loss and damage fund or adaptation financing urgently needed by countries currently at risk and vulnerable to climate change?

Dr. Nick Bernards

For me, this is the big unanswered question about Global Shield. There is a case to be made that Global Shield is a potential complement to the Loss and Damage Fund spearheaded by China and the G77 countries and adopted at the very last minute. It could fill in some gaps, or operate alongside a Loss and Damage fund. The more probable scenario though, at least in my view, is that these initiatives are likely to represent opposing, contending approaches to addressing climate losses.

At the moment, the Loss and Damage Fund exists only on paper. COP participants agreed that there should be a fund but deferred all the big decisions about how it would be financed, on what terms it would pay out, etc. to COP28.

In theory, a Loss and Damage Fund, financed by direct contributions calculated on the basis of historical carbon emissions, seems to me a much more suitable means of addressing climate damages. Both for reasons of justice and for pragmatic reasons of capacity, it makes sense to design a scheme where wealthy countries (and, through taxes, wealthy people and corporations) are the ones expected to pay. A Loss and Damage Fund could also be designed in a way that offers meaningful compensation for the slower, less discrete -- in a word, the uninsurable -- impacts of climate change, rather than for catastrophic events alone. It also represents, at least potentially, a significant departure from the heavy emphasis on private finance.

Thus far, almost all of the actual funding pledges related to loss and damage have been linked to Global Shield. As noted above, pledged contributions to Global Shield are of a rough size where they might be sufficient as initial capital for an insurance programme, while falling several orders of magnitude short of the amounts needed to meaningfully address the effects of climate change. The British capital contribution to ARC, for instance, was GBP 100 million.

Dr. Grace Mbungu

You eloquently present the complex relationship between financial instruments, colonialism, and neoliberalism in your book: “A History of Poverty Finance: Colonial Roots of Neoliberal Failures”. Some would say insurance schemes such as the Global Shield are a form of neocolonial financial instruments that are removed from the realities, needs, and priorities of targeted countries. Given your extensive experience and research in this space, how would you assess the Global Shield, in relation to other financial commitments put forward by the Global North countries in support of Africa’s climate and sustainable development actions?

Dr. Nick Bernards

One of the things I highlight in the book is that many of the insurance schemes similar to those Global Shield would promote are reactions to the persistent development challenges thrown up by colonial histories but are at the same time hampered by the patterns of uneven development left behind by colonial capitalism. So we can’t, in short, understand either the resort to insurance or its practical failures without understanding the durable imprint of colonial capitalism.

Colonial histories have played a major part in shaping the extent and form of people’s vulnerability to climate change. It is something of a truism at this point that those who have contributed least to the climate crisis are often most exposed to its effects. That these disparities are rooted in colonial histories is also increasingly widely accepted. At this point, even the International Panel on Climate Change (IPCC) acknowledges that ‘histories of colonialism’ are key drivers of climate vulnerability, shaping ‘interlinked issues concerning poverty, migration, inequality, access to basic services, education, institutions and governance capacities’ . To give one specific example I’ve written about elsewhere, people whose livelihoods are reliant on peanut farming in Senegal are often seen as being particularly vulnerable to the effects of climate change. They have also been a key focal point for many efforts to develop novel forms of insurance. The biggest immediate reason for this vulnerability is that peanut growing in Senegal is primarily rain-fed, and climate breakdown is making rainfall in peanut-growing regions less predictable. But neither people’s reliance on cash crops nor the predominantly rain-fed character of peanut cultivation are natural occurrences; they have a particular history linked to the structure of the colonial economy. All of this is compounded by the extractive character of colonial development – some authors talk about ‘exploitation without accumulation’ in West Africa – which resulted in much of the value produced in colonial economies being accrued in Europe. Indeed, the particular localised shape of climate vulnerability is intimately linked to colonial histories.

Another key facet here is the set of fiscal constraints that colonial economic systems have left behind for postcolonial states to grapple with. I highlight in the book, and in a recent article, that the rationale for relying on index insurance to manage climate risks has often been precisely that, for governments with limited resources, building a ‘market’ for insurance is an alternative to spending scarce public resources. Part of the backdrop to this turn to insurance is the pervasive condition of austerity that comes with occupying a peripheral position in global financial hierarchies. And again, this turn isn’t something that just occurs naturally; we have to link those embedded fiscal constraints that often justify experiments with insurance to histories of colonialism and imperialism.

At the same time, the reasons why insurance schemes tend to fail are themselves intimately connected to colonial histories. Part of the problem, as I have argued above, is that people who have been impoverished and dispossessed and countries that have been underdeveloped by centuries of extractivism often find it hard to pay insurance premiums. The other issue is that, for insurance schemes to work, there needs to be a complex set of calculative infrastructures in place. Over centuries, ‘conventional’ insurers in the Global North have built up a really elaborate set of statistical techniques, data sources, and computing infrastructures to try to make the kind of fine-grained assessments of risk that are needed to make insurance operations profitable. Insurance in colonial economies was much more restrictive, predominantly commercial and shipping-focused, with some efforts to set up life insurance schemes for settlers, expatriate merchants, and colonial bureaucrats. Those infrastructures aren’t there; long-run historical data on crop yields, weather, and the like don’t exist in the kind of fine-grained detail insurers would want.

The other thing your question touches upon is this kind of neocolonial paternalism in programmes such as Global Shield. I’ll admit, I didn’t talk about this too much in the book, but it is definitely relevant here. One of the main reactions to the failures to enrol more people and countries on previous insurance programmes has been to focus on building ‘insurance cultures’ both among target populations and potential participating governments. Rather than acknowledging some of the more engrained problems (e.g., the things I flagged in my response to the first question above), the first reflex has been to assume that people in the Global South simply need to be educated about insurance. It is a bit old now, but Dia da Costa has written a really compelling critique of these demand-focused interventions in India. The same is often true of country-level schemes. One of the big responses, particularly by UK development agencies, to the failure to enrol more countries onto ARC has been to stress the need to develop ‘insurance cultures’ and the capacity to manage insurance programmes on the part of African governments.

Dr. Grace Mbungu

There is a time aspect built into the climate change and development discourse: the past, present, and future. The Global North’s focus has often been into the future, while countries of the Global South rightfully argue that past and current injustices and wrongs should be addressed and inform future climate and development actions. The Global Shield appears to fall into this dynamic of Global North countries looking “into the future” and ignoring influences of past and current inequalities and injustices on the health and wellbeing of people in the Global South. Against this background, would you say that the Global Shield is an action point in the wrong direction?

Dr. Nick Bernards

I think flagging this time aspect is a good way of putting it. I said above that I think we can talk about climate insurance as almost the inverse of climate justice or climate reparations. It asks the governments and people who are most exposed to the effects of climate breakdown, but have contributed least to creating the crisis in the form of historical greenhouse gas emissions, to take on the cost of protecting themselves from those effects.

A phrase that the UK government likes to use to talk about ARC, for instance, is ‘skin in the game’. You will see this phrase a lot in its annual evaluations of the programme. That is, part of the rationale for having ARC member governments pay premiums for insurance is that, if African governments are paying for their own protection from climate hazards, they will be more cognisant of their own exposures and take more responsibility for mitigating those hazards. You are right to suggest that this obviously glosses over the historical responsibility for creating those hazards in the first place. It is also to my mind a bizarre distortion to imagine that African people and states might be insulated from the effects of climate change by virtue of not paying directly for protection from them. Just this year, we’ve had hundreds of thousands of people displaced by flooding in Beira in Mozambique and looming famine linked to droughts in Madagascar and Northern Kenya. Looking beyond Africa, a third of Pakistan was under water for several months this summer. How is that not ‘skin in the game’?

I should add here that, even in the scenario where premiums are heavily subsidised by donors, there’s a very real possibility that those payments wind up being recycled to financial institutions in the core. Leigh Johnson writes very eloquently about index insurance as an ‘infrastructure for generating rents’. Experiments with insurance sometimes show some benefits for users but require heavy subsidies in order to work. In practice, these subsidies represent a transfer of rents to reinsurers (basically, companies that offer insurance to insurers) able to command large pools of capital. So there’s the question of responsibility around ‘who pays?’, but also a question about what they’re paying for and who ultimately benefits.

I’ve said this above, but something like the Loss and Damage Fund with contributions based on historical emissions represents (at least on paper) a much more promising avenue for a reparative and redistributive approach to the damages caused by climate breakdown.

Dr. Grace Mbungu

The operationalisation details of the Global Shield are still not known. However, based on how insurance funds work, accessing the Global Shield would require participating countries to meet certain criteria to access available funds. In some ways, this mirrors many of the conditional funds that developing countries have been involved with in the past. Considering this and based on your research around colonial finance structures, what is at stake for African countries who choose to opt into a programme such as the Global Shield? In other words, what should African countries be cautious about as this fund evolves?

Dr. Nick Bernards

This question seems especially pertinent for sovereign disaster insurance schemes. The way this works with ARC is that participating governments pay premiums (sometimes with support from donors), and if a set of early-warning signs based on satellite weather data indicates a risk of famine, governments receive a payment to finance a pre-planned disaster relief scheme. This scheme can be adapted based on specific features of the event in question (e.g., the region affected by drought). There is scope for the priorities and mechanisms of these programmes to be shaped strongly by pressure from donors, and for ‘good governance’ kind of conditions. Thus far, to my knowledge, and looking from the outside in, this has not created major conflicts with ARC; although, in a couple of instances, countries have been turned away from the scheme because their disaster relief plans were not approved. It is not clear, though, how much (if any) say communities directly targeted by these plans have in which priorities are set, in how aid is distributed, and what form it takes. But this is an area where any new plans will need to be designed carefully and where the risk of this kind of conditionality, or of prioritising the interests and preferences of donors over local communities, is definitely present.

Another problem here is that we cannot view the operation of insurance schemes like these in isolation from the wider conditions of austerity and conditionality in which African governments, in particular, operate. I have mentioned a couple of times before that the capacity to pay is a big problem for the operation of these schemes in practice. In the aftermath of the pandemic and given the rising dollar, we are headed into a potentially severe debt crisis across much of the Global South. Several African governments (e.g., Zambia, Ghana, Chad) are already in difficult negotiations with private creditors and the International Monetary Fund over debt restructuring. Debt relief has to be at the forefront of any programme of climate justice, as a number of people and organisations have argued recently. Even what I would consider a limited and inadequate programme such as Global Shield will not work if it is rolled out against the backdrop of renewed structural adjustment.

Dr. Grace Mbungu

Historically, the relationship between Global South and Global North countries has been unequal and riddled with injustices. What would you suggest African states do to guard against such injustices and inequalities in the implementation and management of the Global Shield?

Dr. Nick Bernards

To my mind, the main answer to this question is to focus efforts on initiatives for debt relief and on the Loss and Damage Fund. To me, if Global Shield is to make a positive contribution, it has to be as a complement to those more expressly redistributive measures rather than a substitute for them.

Dr. Grace Mbungu

Lastly, given what you have said above, and given the fact that we do not have the full outlines of the Global Shield so far, if you were designing the Global Shield, what would it look like? In other words, if you were asked to design a Global Shield that works for developing countries, especially African countries, what are the most important issues that you would take into account?

Dr. Nick Bernards

I have said this above, but the main aspect of Global Shield that I find promising is the reference to social protection. If it is accompanied by meaningful contributions to a Loss and Damage Fund, and by significant debt relief for both individuals and states in the Global South, then a scheme focused on supporting the development of social protection schemes that would provide some protection against climate hazards would be a useful complement. We need a mix of, yes, targeted emergency aid for people affected by disasters, but also redistributive social payments, and social provision of housing, water, and other basic infrastructures. A Global Shield set up to facilitate those kinds of social provisions, as a complement to a Loss and Damage Fund, and broader debt relief, rather than an insurance-based alternative to it, might make a meaningful contribution.

Dr. Nick Bernards

Dr. Nick Bernards is Associate Professor of Global Sustainable Development at the University of Warwick in the United Kingdom. He holds a PhD in International Relations from McMaster University, Canada. His research focuses on how the legacy of colonialism shapes the present context of sustainable development practice. In his most recent book, A Critical History of Poverty Finance: Colonial Roots and Neoliberal Failures, he examines how digital financial inclusion reinforces existing patterns of inequality and uneven development.