In 2026, the international climate finance landscape is undergoing a fundamental shift. While climate impacts intensify, closing the gap in financial protection—especially for the most vulnerable—remains critical. However, this urgency meets a challenging political reality: many decision-makers are moving away from climate-centric agendas as international cooperation becomes increasingly fragmented. Traditional 'development aid' and climate finance is being replaced by transactional, interest-based politics, and international funding spaces are contracting. Technological breakthroughs, like AI approaches, are rewriting old business models.  

For the Climate and Disaster Risk Finance and Insurance (CDRFI) sector, these shifts demand a strategic refocus. To remain relevant, investment into resilience must increasingly demonstrate cost-effectiveness and measurable impacts. Closing the financial protection gap is no longer just a moral imperative; it needs to be reframed for its role in national fiscal stability and attracting investments. Insurance partnerships need to scale. With global insurance markets currently seeing softening prices, there is a short-term window to expand coverage as well as reduce protection gaps—and a long-term opportunity to build 'future-proof' partnerships that tackle threats of ‘uninsurability’.  

Against this backdrop, we examine several key issues in 2026 that might shape the debate. 

Advancing Inclusive Insurance through AI Approaches? 

Artificial intelligence is fundamentally reshaping the insurance landscape, moving from a backend optimization tool to increasingly structured client and claims engagement. Can AI transition from a tool for corporate efficiency to a bridge for inclusive insurance and its specific upscaling challenges, especially around product tailoring, client education and awareness raising? One exploration could be whether conversational AI assistants can serve as local risk and product educators and even design parametric coverage. However, technical innovation alone is insufficient; it also demands alignment with local conditions, digital education, and robust ethical AI frameworks and regulation. AI should complement people, not replace them. 

Insurance for Nature? 

2026 might be the year when 'Insurance for Nature' transitions from theoretical research into the deployment of products more widely adopted by market actors. How can insurance products help strengthen the resilience of nature to climate risks? Strategic pivots include fully treating ecosystems as biophysical infrastructure to reduce climate risks—including through assessing and integrating the risk-reducing benefits of nature into traditional risk pricing and investment models. Other approaches include protecting livelihoods that depend on natural ecosystems and supporting stakeholders who protect them. MCII actively engages in the discussion on how such insurance solutions can be structured and scaled, above all, to ensure equity is at the core and not an afterthought.   

Towards Impact-Based Climate Risk Analytics 

The evolution of climate risk analytics is moving beyond simple hazard mapping toward a more nuanced, impact-based approach. To close the protection gap, data must do more than predict a physical event; it must quantify the socio-economic ripple effects on livelihoods, food security, and local infrastructure. By integrating granular vulnerability data with real-time climate modelling, the sector can shift from reactive payouts to proactive, anticipatory action. This is also a necessary bridge to integrate risk modelling with increasingly available loss data and ground-truthing experience—a necessary prerequisite to operationalize national response systems. 

Growing Uninsurability Frontiers? New partnerships! 

As climate volatility pushes certain regions toward the ‘uninsurability frontier’, the traditional insurer-client relationship is being replaced by multi-stakeholder ecosystems where governments, insurers, and other actors share the ‘first-loss' burden and address principal-agent problems in risk management. Actively integrating climate risk insurance into National Adaptation Plans (NAPs) and national risk strategies can serve as an entry point for advancing these risk-layering partnerships. Such partnerships can ensure that adaptation measures and financial protection are not siloed but work in tandem, allowing for active learning and the application of lessons learned from different countries and contexts to keep coverage viable as risk profiles evolve. 

International Progress: Loss and Damage International Funding Architecture Comes on Stream. 

While international progress remains uneven, the establishment of global norms and guidance is essential as countries confront the realities of intensifying climate risks in the next years and decades. A critical milestone in 2026 is the operationalization of the Fund for Responding to Loss and Damage (FRLD), specifically through the "Barbados Implementation Modalities," which allow vulnerable nations to submit their first funding requests. This architecture provides more than just funding; it creates a framework for countries to refine national response systems that address priority gaps and build the robust data systems necessary to quantify both economic and non-economic losses and to build up the response systems. In addition, there are opportunities in 2026 to define the long-term climate finance framework, and with that, the relevance of CDRFI under the UNFCCC. While geopolitical divides may slow international progress, concrete technical gains remain possible through smaller coalitions and progressive actors. One such opportunity lies in the Baku-Belem Roadmap, which calls upon the insurance industry and the V20 Countries to develop a joint strategy for reducing financial losses for individuals and small businesses. 

These topics, along with other emerging drivers of change, do not represent an inevitable trajectory, but rather a set of strategic imperatives. Our goal is to catalyze debate and discussion among MCII members and stakeholders as we continue to unpack these critical issues and actively incorporate it into our work.