Index insurance has demonstrated its potential to help farmers, microenterprises, and other climate-vulnerable clients manage shocks that can otherwise erase years of progress. By linking payouts to an objective measure, such as rainfall, temperature, wind speed, or crop yield, these products can provide financial support more quickly and with lower claims-adjustment costs than traditional indemnity insurance. Yet proving that an index-based product can work is not the same as building a market that can endure. Across emerging markets, many promising insurance initiatives have struggled to

Insurance is usually discussed as a mechanism for responding after a disaster. A defined event occurs, a claim or trigger is validated, and a payout provides resources for recovery. That function remains essential. Yet in markets facing more frequent and severe climate shocks, paying for losses after they occur is not enough. Insurance can play a larger role by helping households, businesses, lenders, and governments reduce risk before an event. The next generation of climate insurance should therefore connect three functions: understanding risk, reducing risk, and financing the losses that