Today, emerging new risks from climate change and increasing disaster impacts pose a looming threat towards societies in terms of exacerbating the severity, intensity and frequency of disaster risks. Every year, natural disasters cause the loss of thousands of lives and livelihoods[sb1] [BK2] , cost billions of dollars in humanitarian aid, disrupt commercial services, and destroy critical infrastructure. Approximately 2.5 billion people worldwide depend on the agricultural sector as the main source of their livelihoods. Between 2005 and 2014 the agricultural sector sustained losses and damages from natural disasters at a cost of $93 billion. To manage these risks, a detailed risk analysis is required as a solid base to understand the complexities of climate and disaster risks. This generally helps to focus on identifying and implementing disaster risk reduction (DRR) measures. However, risk financing and transfer mechanisms such as insurance can address residual risks that cannot be prevented or prepared for. Climate risk insurance is one measure that can act as a viable transfer instrument to cushion people against the adverse impacts of climate-induced disasters. It can provide vulnerable communities with access to alternative coping strategies if integrated into the broader disaster risk management (DRM) strategy.

To facilitate this integration, the Munich Climate Insurance Initiative (MCII) and Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) have developed an Integrated Climate Risk Management (ICRM) approach. MCII and GIZ identified the disaster risk management cycle, also known as the PPRR approach ­− prevent, prepare, respond and recover − as a valuable way to: 1) systematically analyse and pinpoint where insurance can add value, 2) provide an overview to public authorities/government officials of the status of international political momentum, and 3) find synergies between the practical activities and policy of DRM and climate change adaptation (CCA).

To further elaborate on the ICRM approach, this toolbox has been developed to provide a series of specific questions to answer when government officials and other stakeholders consider the use of insurance as a CCA and DRM measure. It offers an insurance perspective to DRR and CCA, with a focus on the added value of climate risk insurance. It explores necessary questions to be considered in order to assess risk, develop risk reduction measures, address residual risk, prepare for imminent disaster impacts, respond, and recover from disaster impacts. This toolbox has been developed for the agricultural sector in developing countries to help stakeholders transfer their risks involved in extreme weather events.