D4.1 Policy recommendations for affordable insurance coverage

The document develops a conceptual framework linking vulnerability, justice and resilience, drawing on European policy debates and the Capability Approach as proposed by Amartya Sen. Vulnerability is of the key elements in the definition of risk, as the interaction between hazards, exposure and adaptive capacity, where it is increasingly recognised that social and economic structural factors play a key role. Justice in adaptation is analysed through distributional, procedural and recognitional dimensions, highlighting that fair adaptation requires not only equitable outcomes, but also inclusive decision-making and recognition of diverse needs. Within this framework, the document examines the role of insurance in climate adaptation and the drivers of the European climate insurance protection gap. Evidence from the SOTERIA case studies shows that low insurance uptake is rarely driven by lack of risk awareness alone. Instead, a number of factors that are discussed in this report have to be considered, namely a) affordability constraints, b) limited trust in insurers and institutions, c) information asymmetries, d) cultural expectations of public compensation and e) weak participation in insurance governance. In particular for example, insurance unaffordability is found to disproportionately affect vulnerable groups, increasing the risk of underinsurance, delayed recovery and maladaptation, particularly where risk-based pricing is applied without equity safeguards. The analysis further shows that innovative insurance solutions can support just resilience, but only when embedded within broader governance frameworks that take into account affordability, transparency, participation and equity. If these conditions are not considered or taken into account, innovative insurance solutions risk missing an opportunity to not only not to make existing inequalities worse but in fact help to build resilience at the local level through innovative insurance coverage or outcomes. Our preliminary findings underline that insurance-based adaptation is in fact an opportunity when also approached from a societal and policy perspective rather than a purely market-driven one. Strengthening just resilience requires treating affordability and access as important objectives, reducing information and trust gaps, helping affected communities to have a meaningful role or even help to co-design and shape innovative solutions solution that not only reduce the protection gap but help address structural inequalities e,g, in conjunction with strong public private partnerships, pooling approaches or other innovative solutions. As is presented in the report when a number of conditions are addressed, insurance can become a genuine enabler of equitable, capability-enhancing climate adaptation that leaves no one behind.