Insurance will not close the climate adaptation gap: Here is where it can help

by Akhand Tiwari, Graham Wright, Rosalind Cornforth and Eizabeth Celia Petty
Sep 22, 2026
2 min

This policy note examines how insurance can support climate adaptation for underserved households, MSMEs, smallholder farmers, and agricultural value-chain actors. It highlights the limits of insurance as a standalone solution and proposes a six-question investability test and seven design shifts to strengthen insurance within a broader climate resilience financing system.

This policy note examines the role of insurance in financing climate adaptation for underserved households, MSMEs, smallholder farmers, and agricultural value-chain actors.

Drawing on discussions from a climate insurance roundtable, co-led by MicroSave Consulting (MSC) and The Pearl (University of Reading), hosted by the National Institute of Economic and Social Research (NIESR) at London Climate Action Week 2026, the note argues that adaptation finance faces two distinct constraints, an unresolved funding gap and an incomplete financeability architecture, and that insurance can play a bounded but valuable role within the second. It proposes a six-question investability test for separating adaptation investments suited to credit-plus-insurance from those that require grants, guarantees, or adaptive social protection instead, and sets out seven design shifts, ordered by readiness, for building a more effective insurance architecture. The note draws on evidence from Pakistan, Uganda, Malawi, Lebanon, and elsewhere, and situates insurance within a wider layered resilience system rather than treating it as a standalone solution to the adaptation finance gap.

We gratefully acknowledge the organizations represented at the roundtable for sharing their perspectives and insights: the United Nations Capital Development Fund (UNCDF), the Consultative Group to Assist the Poor (CGAP), the World Food Programme (WFP), Agri3 Fund, the Initiative for Smallholder Finance Advisors (ISF Advisors), The Energy and Resources Institute (TERI), NIESR, Global Parametrics, the Center for Disaster Protection, Practical Action, the University of Washington, and The Nature Conservancy. Their participation informed the perspectives and ideas presented in this note.

This was first published in Zenodo on 21st September 2026.