Lloyd’s, the world’s leading marketplace for insurance and reinsurance, has partnered with the United Nations Capital Development Fund (UNCDF) to launch a disaster resilience vehicle. The vehicle will deliver disaster risk financing to Small Island Developing States (SIDS) in the Pacific, supported by members of Lloyd’s Disaster Risk Facility. The Global Disaster Resilience Vehicle will enhance recovery and resilience, leveraging capacity from the global reinsurance market.
The vehicle will leverage donor funds committed to the region and use local networks to provide exposure-based payments directly to climate-vulnerable communities. Initially covering Fiji, Papua New Guinea and Samoa, the vehicle will respond to disasters caused by natural perils including tropical cyclone, earthquake, tsunami and flood – with the long-term aim of scaling and replicating the vehicle throughout the Pacific region as well as the Caribbean, Asia and Africa.
Lloyd’s will work in partnership with the local industry to identify resilience needs and secure the necessary capacity to deliver coverage. This could mean doubling the total amount insured from $1,000 to $2,000 per policy per year, with up to 100% compensation per event.
The partnership supports the Sustainable Markets Initiative (SMI) Insurance Task Force’s commitment made at COP26 to drive tangible action to support the resilience of climate vulnerable countries. Building on Lloyd’s commitments set out through a memorandum of understanding (MoU) with the UNCDF in September 2023, Lloyd’s and Aon will support the scaling up of the UNCDF’s existing programs to close the protection gap for the populations in the Pacific Islands.
“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,” commented John Neal, Lloyd’s CEO, in a statement. “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.”
“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,” said Dominic Christian, global chairman of Aon Reinsurance Solutions.
“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,” according to Pradeep Kurukulasuriya, Executive Secretary, UNCDF.
Lloyd’s said additional benefits of the new vehicle include:
Policyholders: Access to more efficiently priced products that provide relief. Access to affordable loan financing (0-1%). Capability to focus on resilience building with security of funding for post disaster recovery. Immediate access to funding has proven to improve the rate of recovery post disaster.
Local insurers: Support to build capacity and markets; access to more efficient capital; improved product penetration.
UNCDF: Support to leverage current program to improve impact with private sector support that will be sustainable.
Donors: greater impact for the committed funds through localization of funding; and donor budget smoothing as private sector will provide response to unexpected disaster / needs; leverage the disaster risk funding to provide premium loan financing.
Local governments: allow for more efficient budgeting and resilience building, removing the need for disaster response allocation.
The Global Disaster Resilience Vehicle is focused to create local impact through payments directly to those affected by natural disasters. The basic insurance product will provide variable amounts of payout depending on the severity of the event directly to households. Premium financing will be through a loan facility initially started by UNCDF but to be ultimately financed by private sector banks.
Related topics：
