# Loss and Damage for Business: Insurance, Risk Pooling and the New Fund

> What loss and damage means under the Paris Agreement, how the new fund works, what GCC filings say about climate losses, and what it means for companies and insurers.

**Source:** https://www.esgweise.com/insights/loss-and-damage-business-gcc/
**Author:** Sumit Agarwal
**Published:** 2026-11-02
**Frameworks:** Paris Agreement, IFRS S2, ISO 22301
**Countries:** UAE, KSA, Qatar, Bahrain, Oman, Kuwait

---

## Key points

- Article 8 of the Paris Agreement covers loss and damage: the harm climate change causes beyond what mitigation avoids and adaptation prevents. COP21 decided that Article 8 does not involve or provide a basis for liability or compensation.
- The fund for responding to loss and damage, operationalised at COP28 in Dubai, is hosted by the World Bank as a financial intermediary fund for an interim four years, governed by a 26-member board. The UAE committed USD 100 million to it at COP28.
- GCC filings put numbers on the losses: Oman reports about USD 7.30 billion of climate-related losses from 2002 to 2021, and Bahrain estimates about BHD 1.4 billion of damage from a single severe coastal flood scenario.
- For companies, loss and damage is a question of insurance cover, business continuity and physical risk disclosure, not only of international funds.

---

## Introduction

"Loss and damage" entered the UN climate vocabulary as a negotiating issue between states: who pays for the climate harm vulnerable countries already suffer. It has since become an institution, a fund operationalised at COP28 in Dubai. For a GCC company, insurer or bank, the term matters for a more direct reason. It names the losses that remain after mitigation and adaptation, and those losses land on balance sheets.

## Avert, minimise, address

Article 8.1 of the Paris Agreement recognises the importance of **averting, minimising and addressing** loss and damage associated with the adverse effects of climate change, including extreme weather and slow onset events. The three verbs describe a sequence:

1. **Avert** through mitigation: less warming, less harm.
2. **Minimise** through adaptation: sea walls, cooling, water security, early warning.
3. **Address** what remains: response, recovery, rehabilitation and, where possible, risk transfer.

Article 8.4 lists the areas of cooperation: early warning systems, emergency preparedness, slow onset events, irreversible and permanent losses, comprehensive risk assessment and management, **risk insurance facilities, climate risk pooling and other insurance solutions**, non-economic losses, and the resilience of communities, livelihoods and ecosystems.

The decision adopting the Paris Agreement (1/CP.21, paragraph 51) settled one point: Article 8 **does not involve or provide a basis for any liability or compensation**.

## The institutions

| Institution | Role |
|---|---|
| **Warsaw International Mechanism** (2013) | The UNFCCC mechanism on loss and damage, under the Paris Agreement by Article 8.2. Its executive committee runs workstreams on slow onset events, non-economic losses, comprehensive risk management, and migration and displacement |
| **Santiago network** (2019) | Technical assistance to vulnerable developing countries |
| **Fund for responding to loss and damage** | Agreed at COP27 (2022), operationalised at COP28 (2023) |

The fund's design, set out in decision 1/CP.28:

- **Hosting:** a World Bank hosted financial intermediary fund for an interim period of four years, with a new, dedicated and independent secretariat.
- **Governance:** a 26-member board, 12 from developed countries and 14 from developing country groups.
- **Purpose:** assisting developing countries that are particularly vulnerable to climate change in responding to loss and damage.
- **Access:** direct budget support through national governments; national, subnational and regional entities, including those accredited to the Adaptation Fund, GEF and GCF; international entities; and small grants for communities and Indigenous Peoples.
- **Contributions:** developed countries continuing to take the lead; other Parties encouraged to contribute on a voluntary basis. The UAE committed **USD 100 million** at COP28.

## What GCC filings say about losses

The GCC's own submissions to the UNFCCC put numbers on the losses that loss and damage describes.

- **Oman** reports climate-related economic losses of about **USD 7.30 billion from 2002 to 2021**, and projects USD 13.14 billion by 2040 without action (NDC 3.0). Cyclone Gonu in 2007 alone caused about USD 4.2 billion of damage and 50 deaths (second National Communication).
- **Bahrain** estimates the economic damage from a single occurrence of its severe coastal flood scenario at about **BHD 1.4 billion**, against BHD 122 to 161 million for the physical interventions that would mitigate it (National Adaptation Investment Plan).
- **The UAE** recorded 250 mm of rain in 24 hours in April 2024, a year's rainfall in a day and a national record (first Biennial Transparency Report).
- **Kuwait** estimates that 0.5 to 2 m of sea level rise would cost 1.4% to 3% of its coastal territory, affecting 5% of GDP (NDC).

Bahrain's own figures make the business case: about BHD 1.4 billion of damage from one severe event, against BHD 122 to 161 million to protect against it. The same arithmetic applies at the level of a single asset.

## What it means for companies

The loss and damage fund is a channel between governments. Companies do not claim from it, and the Paris Agreement rules out liability. For a business, loss and damage is managed through four tools.

**1. Insurance and risk transfer.** Article 8.4's reference to risk insurance and pooling reflects how residual losses are financed in practice. For GCC companies, that means checking whether property and business interruption cover responds to flood, storm surge and extreme heat, and whether parametric covers, which pay on a measured trigger such as rainfall or wind speed, fill gaps.

**2. Business continuity.** The April 2024 floods in the UAE showed that climate events stop operations, supply chains and staff movement. A continuity programme built to [ISO 22301](/insights/iso-22301-business-continuity-management/), with a [business impact analysis](/insights/business-impact-analysis-bia-risk-assessment/) that includes climate scenarios, is the operational answer.

**3. Physical risk assessment.** The national hazard figures (see [sea level rise in the GCC](/insights/gcc-sea-level-rise-national-figures/)) are the starting point for asset-level analysis of exposure and expected loss.

**4. Disclosure.** [IFRS S2](/services/ifrs-s1-s2-climate-risk/) requires companies to disclose physical climate risks, acute and chronic, and their current and anticipated financial effects. Loss events and insurance gaps belong in that disclosure.

For banks and insurers, the same events drive credit losses, collateral impairment and claims. See [what your country's NDC means for your bank's climate risk](/insights/gcc-ndc-bank-climate-risk/).

ESGweise assesses physical climate risk for GCC companies and portfolios, builds business continuity programmes to ISO 22301, and supports IFRS S2 disclosure of physical risk. Explore our [IFRS S1 and S2 and climate risk](/services/ifrs-s1-s2-climate-risk/) service.

*Sources: Paris Agreement, Article 8; decisions 1/CP.21 and 1/CP.28; NDCs, National Communications, first Biennial Transparency Reports and National Adaptation Plans of Oman, Bahrain, the UAE and Kuwait; WAM, 30 November 2023.*

---

## Frequently asked questions

### What is loss and damage?

Loss and damage refers to the adverse effects of climate change that are not avoided by mitigation or prevented by adaptation, from extreme events such as storms and floods and from slow onset events such as sea level rise. Article 8 of the Paris Agreement recognises the importance of averting, minimising and addressing it. Economic losses include damaged assets and lost output; non-economic losses include cultural heritage, ecosystems and lives.

### Can companies claim compensation under the loss and damage fund?

No. The fund supports developing countries that are particularly vulnerable to climate change, through national governments, accredited entities and small grants for communities. Decision 1/CP.21 states that Article 8 does not involve or provide a basis for any liability or compensation. Companies manage their own climate losses through insurance, continuity planning and adaptation.

### Who contributes to the loss and damage fund?

Decision 1/CP.28 invites financial contributions with developed country Parties continuing to take the lead, and encourages other Parties to provide support on a voluntary basis. At COP28 the UAE committed USD 100 million, as reported by the UAE news agency WAM on 30 November 2023.

### How does insurance relate to loss and damage?

Article 8.4 of the Paris Agreement names risk insurance facilities, climate risk pooling and other insurance solutions as an area of cooperation, alongside early warning, emergency preparedness and comprehensive risk assessment and management. For businesses, insurance and risk transfer are the main way to handle residual climate losses.


---

Published by ESGweise Global LLC, Dubai. https://www.esgweise.com