1 month ago
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Lloyd’s has announced the launch of a new disaster resilience vehicle working with the United Nations Capital Development Fund (UNCDF), with the global reinsurance market expected to be tapped to support the delivery of a parametric disaster insurance product for Small Island Developing States (SIDS) in the Pacific.
The structure, which is being called a first of its kind, has been developed in partnership with the UNCDF, Lloyd’s, and Aon.
Members of Lloyd’s Disaster Risk Facility will support the Global Disaster Resilience Vehicle, with a goal to enhance recovery and resilience, utilising the global reinsurance market as a capacity provider.
Donor funds will be leveraged up front to pay premiums, while local networks will be used to provide exposure-based payments directly to climate-vulnerable communities.
Backed by capacity from the global reinsurance market, Lloyd’s will work with the local industry to identify their resilience needs and secure the capacity required to deliver coverage.
Initially the new disaster risk financing arrangement will cover Fiji, Papua New Guinea and Samoa, with the vehicle responding to disasters caused by natural perils including tropical cyclone, earthquake, tsunami and flood through parametric triggers.
The long-term goal is to scale up the facility and be able to replicate it throughout the Pacific region as well as the Caribbean, Asia and Africa.
The insurance policies sold in the regions covered will be parametric in nature, to ensure rapid responsiveness in terms of payouts when disasters strike.
The reinsurance capacity, meanwhile, will be structured on an indemnity basis and cover the entire facility across perils.
John Neal, Lloyd’s CEO, commented on the news, “The insurance industry has been engaged in disaster risk finance for decades and has an increasingly important role to play in providing capital and tailored investment solutions to build resilience. Establishing this new vehicle reinforces the crucial role Lloyd’s and the (re)insurance industry plays in supporting communities within the Pacific Islands to respond and recover quicker from disaster.”
Dominic Christian, Global Chairman of Aon Reinsurance Solutions, added, “Providing access to risk capital to reinforce and augment the work of the UNCDF is an important step in helping the Pacific islands build resilience against natural disasters, and becomes even more important given the potential impacts of climate change. Working with the UNCDF, Lloyd’s, and the DRF represents an exciting collaboration, and underpins our belief that combining our resources and expertise is the most efficient and effective way to develop an ecosystem for disaster risk financing that can benefit the countries and communities that need it most.”
Pradeep Kurukulasuriya, Executive Secretary, UNCDF also said, “UNCDF has a unique mandate to provide blended financing instruments to emerging economies, including climate-vulnerable SIDS to development challenges like impact of climate change and extreme weather events. Through a combination of grants, guarantees and concessional loans, UNCDF through its climate risk insurance programme partners, aims to support local market ecosystems to deliver sustainable solutions at the last mile to build the resilience and preparedness of vulnerable communities. We are committed to working with the insurance and reinsurance industry to establish this investment vehicle that will be tested in the Pacific, replicated and scaled to other markets.”
English (US) ·