Escalating global crises and climate-related shocks are exposing the immense costs and inefficiencies of mobilizing funds for recovery after disasters. This has underscored the importance of Climate and Disaster Risk Finance and Insurance (CDRFI) as a key solution to ensure timely, predictable funding for crisis response. At the 4th International Conference on Financing for Development (FfD4) held in Seville, all 192 UN Member States endorsed the Compromiso de Sevilla, which calls for governments to prioritize pre-arranged financing mechanisms that can rapidly support communities in need.
However, pre-arranged instruments like insurance can only be effective if a country’s social protection systems are ready to distribute those funds quickly and fairly. While social protection programmes are typically designed for routine assistance, very few are flexible enough to expand during crises. Without better coordination, funds may be delayed or unequally distributed, undermining the speed and fairness of recovery efforts.
To achieve a faster and more inclusive crisis response, risk finance and social protection systems must be integrated into a single operational pipeline—from trigger to payout to delivery. Currently, each system operates with separate assumptions about beneficiaries, funding levels, and delivery speed, often creating gaps in crisis response. Better alignment between financial instruments and social assistance mechanisms ensures that when shocks occur, pre-arranged funds can flow efficiently to those who need them most.
Parametric insurance, which releases funds automatically when specific triggers such as rainfall or wind speed thresholds are met, has revolutionized post-disaster finance. Yet, challenges persist in transferring payouts to affected families due to bureaucratic delays or lack of verified beneficiary data. This shows that risk finance alone is not enough—strong social protection systems must complement it to ensure rapid delivery of aid.
Several countries have already demonstrated the potential of this approach. Kenya’s Hunger Safety Net Programme scales up during droughts using sovereign insurance payouts. Dominica channels funds from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) directly into social protection through a World Food Programme partnership. Similarly, Africa Risk Capacity (ARC) insurance supports national contingency plans that link payouts with established social protection channels.
To ensure timely and equitable support, governments need to strengthen social registries and payment mechanisms that can adapt to shocks. The Dominican Republic offers a strong model, using its Sistema Único de Beneficiarios (SIUBEN) registry, Climate-Shock Vulnerability Index (IVACC), and Supérate cash transfer programme to identify and reach vulnerable households during emergencies. This adaptive system reached 1.6 million households in recent crises, preventing an estimated six percent rise in poverty.
Building on this foundation, UNDP is collaborating with the Dominican Republic to design a risk finance scheme that channels payouts through Supérate, using SIUBEN/IVACC to pre-identify households and the Ficha Básica de Emergencia (FIBE) system to assess eligibility and deliver rapid payments.
A new UNDP report, “Social Protection, Risk Finance and Insurance,” outlines a four-pillar approach to integrate financing and delivery systems into one cohesive framework. These pillars include financing, institutions and partnerships, programmes and delivery systems, and data and information. Together, they provide a roadmap for aligning CDRFI with social protection, ensuring that financial mechanisms and delivery systems operate as one unified, efficient, and equitable response structure.
