Let’s be candid. We’re entering a new climate era. Climate disasters and stresses are intensifying, and the insurance markets are beginning to price in the risk. For some cities, that’s not merely a threat, but rather a question of survival. If cities become too expensive to insure—or worse, become uninsurable—capital will disengage.

COP29 in Baku recentered the New Collective Quantified Goal (NCQG). The goal is enshrined in the 2015 Paris Agreement as a commitment for developed countries to raise finance to support developing countries’ climate actions. COP29 raised the target to $300 billion in commitments annually; however, this comes with a larger goal of $1.3 trillion annually by 2035. But without a clear view of how these goals relate to insurability at the city-level, these investments are unlikely to have commercial support.

Insurance as a market signal

Insurance is a proxy for risk perception. Essentially, insurers signal what risks are considered worthwhile. When insurers withdraw from providing coverage to specific markets, it signals that the underlying risk-return balance is no longer attractive.

Markets, consequently, respond. Insurers have begun to create geographic winners and losers along this insurance axis. For example, in Australia, insurers have begun withdrawing coverage from cyclone-prone regions in Queensland, citing unsustainable risk exposure. Similarly, in California, repeated wildfire events have led major insurers to pull back coverage, leaving homeowners with limited options and rising premiums.

Prices are changing; coverage is becoming less comprehensive; and the natural consequence is that the uninsured most vulnerable members of society or the public sector ends up paying the bill. This has knock-on effects. Namely, lenders realign collateral values. Investors begin to require increased returns. As a result, governments are forced to carry growing fiscal exposure as insurers of last resort.

The protection gap is not theoretical. It is a price signal that capital is already responding to. The protection gap refers to the difference between economic losses from disasters and the amount covered by insurance. It matters because it signals where capital is exposed without risk transfer mechanisms, increasing fiscal vulnerability. The European Central Bank cautions that the protection gap is growing and the Bank for International Settlements warns that certain geographies are heading towards an “insurability tipping point.” If we do not heed these warnings, we are merely designing finance for paper cities.

Three policy recommendations for COP30

For capital to flow into adaptation investments, cities must provide investors with a clear rationale for their return on investment (ROI). Cities need to prioritize a resilience portfolio approach that minimizes the insurance protection gap. Minimizing the insurance protection gap means reducing the share of climate-related losses that remain uninsured, which currently exposes cities, businesses, and households to significant financial shocks. A smaller protection gap signals to investors and insurers that the city is actively managing systemic risk, making it a more resilient and attractive investment environment. This requires integrating financial risk transfer mechanisms with physical adaptation measures so that both the probability and severity of losses are addressed.

Minimizing the protection gap

As nations prepare for COP30, there are three clear priorities that need to be part of the climate finance agenda in Belém. First, cities need a framework to have ROI-aligned resilience portfolios. There cannot be subsidies for projects that have not considered this approach. The conversation on adaptation investments must be depoliticized and properly measure avoided losses, saved insurance coverage, and stabilized tax collections.

Second, national governments should make insurability a condition for concessional capital eligibility at the city level. Part of the NCQG should be made dependent on city-level portfolios that quantify risk reduction and insurance impacts. Yes, concessional public sector capital disbursements should prioritize cities that demonstrate measurable risk reduction and insurance impact through robust resilience planning.

Finally, the private sector has a clear role. There must be work on pricing and more weight to protection-gap quantification and mitigation in municipal credit rating models. This approach can incentivize positive protection-gap outcomes. For example, better credit ratings could translate to lower cost of capital, which would align incentives within city silos.

Belém must be the COP where we finally stop putting money into future write-offs and start putting money into resilience that investors will see value in. This is not utopia. Adaptation’s success is found in the plumbing: governance, data, delivery, and—yes—insurability.

This means that inscribing insurability into the UAE–Belém indicator activity is essential. Tying it to the NCQG eligibility further ensures that it can become a keystone metric for blended finance. If we get it right, we can turn adaptation from a cost center to a capital magnet.