Guest blog by Dr Koko Warner, Laura Schäfer and Michael Zissener of the Munich Climate Insurance InitiativeThis is part 3 of a three-part blog series that we’ll publish before, during and after the Paris climate conference COP21: check out part 1 and part 2.

Last month in Paris, after years of intense negotiations and amid jubilant celebrations, we witnessed 195 governments successfully create a historic international agreement to tackle climate change. While the Paris Agreement is not perfect, and everyone is clear that the real work will lie in actually implementing the agreement and continually increasing its level of ambition, it marks an undeniable turning point in the world’s response to the growing threat of climate change. As well as the overall success of the agreement, COP21 saw a significant, tangible milestone in delivering on climate risk insurance specifically.

This marks a defining moment for us at the Munich Climate Insurance Initiative (MCII). MCII is a partnership between some of the world’s largest insurers, academic think-tanks, NGOs and adaptation and insurance practitioners. Among other projects, we provide technical and advisory input to the G7 Initiative on Climate Risk Insurance (which you can read more about in parts 1 and 2 of the blog series, and see more below). For 10 years we have been working to advance insurance solutions for the world’s most vulnerable communities, and over the years we have participated in numerous COP climate summits, pushing for a strong outcome and making the case for climate risk insurance for poor and vulnerable people.

2015 signalled progress on climate risk insurance in three key parts of the Paris Package:

1. The “Paris Agreement” itself, the core legally-binding part of the deal, for the first time introduced Loss and Damage as a ‘third pillar’ of international climate policy through a standalone article, alongside mitigation (preventing further dangerous climate change) and adaptation (adjusting to climate impacts). This sends a signal that vulnerable countries will not be left alone with the consequences of climate change. This is a significant milestone because in the lead-up to Paris, it was contested whether there would be a separate recognition of Loss and Damage. Importantly, this article secures the future of the Warsaw International Mechanism on Loss and Damage (whose current workplan runs out in 2016), and mandates governments to expand and strengthen it. It also specifically names “comprehensive risk assessment and management” and “risk insurance facilities, climate risk pooling and other insurance solutions” as two key areas in which governments should enhance their understanding and action.

2. The “Decision” – the non-legally binding part of the text, which sets out the action plan of the UNFCCC and governments, outlined the roadmap for work in coming years on comprehensive climate risk management and recognised insurance as an essential tool to address loss and damage. It requested the Executive Committee of the Warsaw International Mechanism on Loss and Damage to “establish a clearinghouse for risk transfer that serves as a repository for information on insurance and risk transfer, in order to facilitate the efforts of Parties to develop and implement comprehensive risk management strategies”.

3. The G7 and partners presented a “Rapid Action Package” for the G7 Initiative on Climate Risk Insurance, as part of the “Lima Paris Action Agenda”. Together they committed to provide $420 million (around £285 million) towards the aim of boosting climate risk insurance coverage by 400 million vulnerable people by 2020. The Rapid Action Package presented at COP21 aims to cover the first 180 million people by 2016 towards the ultimate 2020 target, through increased support for several existing platforms, such as the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Facility, the Pacific Catastrophe Risk Assessment and Financing Initiative, and the German government’s climate insurance fund.

So what’s our verdict? The Paris outcome demonstrates a shift to a new paradigm in the way governments approach climate risk management. Through the three critical components outlined above – the “Agreement”, the “Decision”, and the G7 Initiative on Climate Risk Insurance – the stage is set for the next five years as we move towards implementing innovative insurance solutions for poor and vulnerable people in ways that increase resilience.

 These solutions will only be successful if they tackle two difficult challenges: (1) they must benefit the poor, vulnerable and hard-to-reach groups who currently have negligible access to insurance coverage, and (2) they must re-think approaches, utilise new technologies and find ways to make insurance schemes affordable, including through premium support, but also sustainable for the long term. The yardstick of success between 2016 and 2020 – when the Paris Agreement comes into legal force – will be the development of credible plans for implementing risk management strategies and schemes that include insurance for vulnerable countries and people, and robust national plans that assess and map climate risks and incentivise risk reduction and transfer.

So as we applaud the successful Paris outcome, what we’re really looking forward to is the hard work of bringing it to life.