Loss and damage funds are on the way—but they’ll fall short upon arrival
By Jorge Gastelumendi Thu, Nov 5, 2026
On October 22, the Fund for responding to Loss and Damage (FRLD) provisionally approved a grant to support to Nepal’s recovery. In August, the country faced catastrophic glacial collapse and flash floods that have led to an estimated $4.71 billion in reconstruction costs.
The fund’s provisional approval grants the country $21 million. That is a meaningful and necessary start. But it is not a full solution. The provisional support represents less than 1 percent of the projected total losses and damages for Nepal.
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In a seemingly unrelated update, a report released just a week before the FRLD announcement indicated that the insurance sector is pulling away from some regional markets because of climate risks, warning that such a trend will lead to an “increase in uninsured losses for which someone else will have to pay the price.”
Transferring climate-related financial risks to an extended financial ecosystem—one that arguably has broader shoulders than domestic or international public funds—is necessary now more than ever. But the insurance industry is clearly moving away from this role and risk.
The reality is that the loss-and-damage challenge has become unmanageable to a degree in which all will have to pay. Hence, the solution needs to be systemic. That means that governments, multilateral development banks, philanthropy groups, the insurance sector, and the financial system will need to step up their game.
Loss and damage in an El Niño year
According to the Peterson Institute for International Economics, global economic losses from the ongoing El Niño could total $986 billion in 2027. Concerningly, “those losses could rise to at least $7.2 trillion over the following five years.”
Comparing those numbers to Nepal’s disaster yields that the cost of losses and damages related to the El Niño could be equivalent to two hundred major catastrophic events.
A single fund, a single industry, a single country, cannot deal with this magnitude of impact. Doing so requires a systemic solution, one that sees public and private sector leaders factoring climate risks into their decision making. From regulatory reforms on risk pricing and risk sharing, to meaningful disclosures, there are solutions that have already proven useful. Now, the conversation on loss and damage must move beyond the fund alone.
Jorge Gastelumendi is the senior director of the Atlantic Council’s Climate Resilience Center. He formerly served as chief advisor and negotiator to the government of Peru, playing a critical role during the adoption of the Paris Agreement in the government’s dual role as president of COP20 and co-chair of the Green Climate Fund’s board.