ADB, UNCDF, and UNDP to Develop Climate Insurance Market for Fiji’s MSMEs

The Asian Development Bank (ADB), the United Nations Capital Development Fund (UNCDF), and the United Nations Development Programme (UNDP) are partnering to establish a pioneering insurance market for micro, small, and medium-sized enterprises (MSMEs) in Fiji. The initiative, supported by $950,000 in technical assistance from the Asia-Pacific Climate Finance Fund (ACliFF), aims to provide financial protection for businesses increasingly vulnerable to climate shocks and extreme weather events.

Building Climate Resilience for Fiji’s Small Businesses

Fiji’s economy is heavily reliant on its MSME sector, which makes up more than 80 percent of all businesses and employs over one-quarter of the workforce, according to the Fiji Bureau of Statistics. Despite their importance, these businesses remain highly exposed to cyclones, floods, and other climate-induced disasters, with very limited access to insurance products tailored to their needs.

The new program will assess the insurance landscape in Fiji, identify gaps in coverage, and collaborate with domestic insurers to design and pilot innovative products. It builds on the Pacific Insurance and Climate Adaptation Programme (PICAP), which has already introduced parametric insurance to households and communities across the Pacific.

Aaron Batten, Regional Director of ADB’s Pacific Subregional Office, stressed the significance of the initiative:

“With small businesses making up such a significant proportion of the Fijian economy and workforce, it is essential to protect this sector. This initiative will help lay the foundation for a domestic insurance market specifically designed to meet the needs of these businesses and support climate resilience across critical sectors of the Fijian economy.”

Parametric Insurance: Fast, Predefined Payouts

A cornerstone of the initiative will be the deployment of parametric insurance—a mechanism that issues payouts based on pre-agreed triggers such as rainfall thresholds, cyclone wind speeds, or wave heights. Unlike traditional indemnity insurance, there is no need to prove actual damages. This allows for swift and predictable disbursements, giving MSMEs access to immediate liquidity for recovery and continuity in the aftermath of a disaster.

The Pacific region has been a testing ground for such products under PICAP, with payouts already helping communities cope with climate shocks. Extending this approach to the business sector is expected to reduce downtime, stabilize employment, and protect livelihoods.

A Multi-Partner Approach to Climate Finance

The initiative is strategically aligned with ADB’s Country Partnership Strategy for Fiji (2024–2028), which emphasizes resilience against economic and climate-related shocks. It also strengthens the work of PICAP, jointly implemented by UNCDF, UNDP, and the United Nations University’s Institute for Environment and Human Security.

Pradeep Kurukulasuriya, Executive Secretary of UNCDF, highlighted the global significance of the approach:

“This innovative approach empowers MSMEs in the world’s toughest economies to flourish, strengthen resilience, and foster sustainable development that uplifts communities and leaves no one behind.”

Munkhtuya Altangerel, UNDP Resident Representative for the Pacific Office in Fiji, added:

“UNDP is proud to partner in strengthening the resilience of MSMEs. This initiative supports our broader efforts across the Pacific to promote risk-informed development, harness digital innovation, and accelerate progress.”

ACliFF: Unlocking Climate Resilience Finance

Funding for this project comes from the Asia-Pacific Climate Finance Fund (ACliFF), a multi-donor trust fund established in 2017. ACliFF focuses on supporting financial risk management solutions that can unlock capital for climate-smart investments and enhance resilience. Its support for parametric insurance reflects a growing recognition that financial preparedness is as important as physical infrastructure in addressing the escalating risks of climate change.

Looking Ahead: Scaling Up Insurance for Resilient Economies

As climate impacts intensify, creating sustainable risk-transfer mechanisms is seen as crucial for safeguarding vulnerable economies. By designing insurance products tailored to MSMEs, the initiative aims not only to protect Fijian businesses but also to establish a model that can be replicated across other small island developing states (SIDS).

ADB, UNCDF, and UNDP’s collaboration illustrates the value of multi-stakeholder partnerships, combining the financial expertise of development banks with the on-the-ground reach of UN agencies. The project is expected to contribute to Fiji’s economic stability, protect jobs, and help businesses rebound faster after disasters, ultimately reinforcing the country’s broader climate adaptation agenda.