Addressing Climate-Related Insurance Protection Gaps in the Caribbean

The Caribbean region is particularly vulnerable to climate-related hazards, including hurricanes, floods, droughts, and extreme rainfall events. While these events increasingly threaten livelihoods, assets, and economic stability, access to financial protection remains uneven. Many households, small businesses, farmers, fishers, tourism workers, and informal workers remain uninsured or underinsured, leaving them financially exposed to climate shocks.

To better understand these challenges, UNU-EHS/ MCII, with support through the Lloyd's Inclusive Futures initiative, conducted a regional study examining climate-related insurance protection gaps in Barbados, Grenada, and Jamaica. The research focused on climate-vulnerable individuals and entrepreneurs in the farming, fishing, and tourism sectors and examined how climate risks are experienced, financed, and managed at the micro and meso levels. The study draws on 99 interviews with community members and experts across the three countries, an online survey with 58 respondents, and desk research. Primary data was collected in September and October 2025.

Key Findings

The research found that significant protection gaps persist across the financial protection system. While sovereign risk financing mechanisms can provide important post-event liquidity to governments, support does not always reach affected households, small businesses, and livelihood groups in a timely or sufficient manner. At the meso level, cooperatives, associations, and community organizations rarely have access to collective climate insurance, despite their potential to pool risks and reduce costs for their members.

At the household and livelihood level, protection gaps are more pronounced. Many climate-vulnerable communities continue to carry climate-related losses themselves, with productive assets such as boats, engines, crops, livestock, equipment, and small businesses often remaining uninsured.

The study identified several factors that continue to limit access to and uptake of climate risk insurance:

Affordability constraints, particularly for people with irregular or seasonal incomes.
Limited awareness and understanding of insurance products.
Mistrust in insurance, often linked to past experiences with slow or uncertain payouts and poor communication
Insurance products and payment schedules are not sufficiently aligned with informal livelihoods and local needs.
Limited use of trusted local intermediaries, such as NGOs, cooperatives, credit unions, and community organizations, for outreach and distribution.

The research highlights that product design alone is not enough. Trust, affordability, communication, and delivery channels are also critical to whether insurance is perceived as valuable and accessible by vulnerable communities.

Recommendations

The study points to opportunities to develop more inclusive and accessible climate risk insurance solutions. These include co-designing micro- and meso-level products with communities, using simple and transparent triggers, enabling fast and accessible payouts, offering flexible payment options, and partnering with trusted community-level organizations for outreach and distribution. These measures can help ensure that climate risk financing mechanisms are better aligned with local realities, more accessible to underserved groups, and more effective in supporting faster recovery after climate-related shocks.