Powering Resilience: Insurance Solutions Strengthening Rural Clean Energy Access

The UNDP report argues that integrating insurance into off-grid energy systems can protect rural households and solar companies from climate-driven income shocks, stabilizing repayments and strengthening resilience. It highlights how bundled, tech-enabled insurance models, like index, health and asset coverage can make clean energy access more secure and sustainable for vulnerable communities.

An UNDP report, drawing on insights from institutions including UNDP’s Climate Promise, the Insurance and Risk Finance Facility, Sustainable Energy for All, the International Finance Corporation, the African Development Bank, and iGravity, reveals the growing interdependence between clean energy access and financial resilience in rural regions. Across sub-Saharan Africa and Asia, off-grid households face rising climate shocks that dent incomes, disrupt food production, and undermine their ability to pay for basic solar services. With PAYGo repayment rates stuck at around 65 percent and one in four customers already 30 days behind, the report warns that the combined pressures of droughts, floods, and crop disease are destabilizing energy providers and deepening rural vulnerability.

Households Exposed on All Fronts

The report depicts a landscape where end users, especially smallholder farmers, carry multiple, overlapping risks: volatile incomes, unpredictable health expenses, and damage to essential productive assets. Women bear the steepest burdens, facing structural barriers to land, credit, and labour-saving technology, while absorbing the majority of unpaid domestic work. Savings groups and informal networks offer some cushioning, but collapse when entire communities face simultaneous climate disasters. With no insurance, a single failed harvest can trigger a cascade of food insecurity, debt, medical shocks, missed school fees, and, eventually, the shutdown or repossession of solar systems critical for income generation.

Solar Companies Under Growing Stress

Distributed renewable energy companies, especially PAYGo solar firms, operate in increasingly fragile conditions. Many lowered credit requirements to scale quickly, only to be hit by rising default rates. Hardware risks, supply-chain bottlenecks, cyber vulnerabilities and inadequate after-sales service add further strain. The collapse of Mobisol stands as a vivid illustration: despite electrifying more than 600,000 people, it succumbed to climate-driven customer defaults in Kenya and cash-flow stresses, showing how a single climatic shock can reverberate across the entire business model when risk-transfer tools are absent. Financing institutions, from DFIs to private equity funds, feel the same tremors; their exposure is directly tied to the survival of the energy firms they fund.

Insurers and Innovators Testing New Models

Insurance companies face steep barriers to operating in low-income rural markets, limited data, low customer trust, and high distribution costs. But recent innovations hint at what is possible. In Rwanda, Bboxx and RADIANT YACU use EV telematics to offer affordable coverage to 130,000 electric motorbike riders at premiums well below market rates. In Nigeria, Bboxx and Turaco bundle life and health coverage with solar home systems and enable WhatsApp-based claims, ensuring customers remain financially afloat during medical emergencies. These models prove that digital infrastructure, PAYGo platforms, and real-time data can make insurance both affordable and accessible for last-mile communities.

Five Insurance Solutions That Could Transform the Sector

A core contribution of the report is its assessment of five insurance products tailored to the realities of rural energy users and providers. Index insurance for farmers, triggered by rainfall or yield thresholds, has shown promise in Zambia, where its integration with PAYGo contracts reduced mass defaults after bad seasons. Government-administered index insurance, inspired by Uganda’s agricultural scheme, highlights how subsidies and pooled national risk can dramatically expand coverage. Life and health insurance delivered through PAYGo instalments protects families from hospitalization and funeral costs that often derail solar payments. Credit-risk insurance for DRE companies could shield providers from climate-linked repayment shocks, while asset-protection insurance safeguarding SHSs and productive-use equipment could stabilize household income and company revenues.

Across these solutions, the report stresses that insurance is not a standalone fix for affordability barriers or weak service delivery. But when woven into energy-access strategies, supported by governments, reinsurers, donors, and DRE companies, insurance can become a powerful shock absorber. It can keep households from sliding into crisis, protect solar companies from collapse, encourage investor confidence, and reinforce national climate-resilience and energy-access goals. In a future shaped by rising climate uncertainty, the report concludes, financial protection is no longer peripheral; it is essential to the sustainability and inclusiveness of the global energy transition.