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New framework for climate-vulnerable countries reengineers approach to financing natural catastrophe response

08 November 2021

Framework aimed at proactively protecting countries most vulnerable to rising sea levels and extreme weather events through a novel public-private investment approach

The Insurance Task Force (ITF) as part of His Royal Highness The Prince of Wales’ Sustainable Markets Initiative (SMI), has today launched its Disaster Resilience Framework for Climate-Vulnerable Countries.

The framework aims to demonstrate the opportunity that exists to blend public and private investment with insurance that could reengineer and drastically improve disaster resilience in low- to middle-income countries who are most at risk from climate-exacerbated extreme weather events. It highlights the unique potential there is for multilateral development banks, international aid donor and the private sector to partner to create large scale, repeatable, efficient and high impact physical, economic and humanitarian financing and risk mitigation solutions for climate-vulnerable developing countries.

The framework is adaptable and scalable across multiple developing countries to address climate-exacerbated natural hazards and weather perils including drought, flooding tropical cyclones, convection storms, and wildfire. It details how pre-arranged public-private financial support could be structured and delivered alongside risk understanding and mitigation to help protect developing nations from the long-term and often irreversible economic and societal damage that extreme weather events bring.

In an effort to pilot the framework and demonstrate its potential, the SMI Insurance Workstream is working with agencies in Kenya in developing a novel approach to bring private sector resources to bear in support of more resilient agriculture across the drought and flood prone country. The initiatives being explored include a crop or livestock insurance mechanism tied to an impact investment bond, in which the government uses the principal to finance resilience initiatives among small holders. This approach could deliver wider development benefits, including increased economic activity in communities resulting from a more resilient environment.

Dominic Christian, Global Chairman, Aon Reinsurance Solutions and Chairman ClimateWise, said: “It is our great honour to be part of an industry collaboration that provides a practical and immediate solution to the needs of so many in low- to middle-income countries. This framework brings focus to an urgent opportunity for public-private partnerships to support developing countries in their ability to finance, manage and build greater resilience in the face of increasing extreme weather events that bring long-term, devastating impacts to their communities and economy.”

Joachim Wenning, Chair of the Board of Management of Munich Re, added: “Unlike industrialised countries, in developing and emerging countries the share of economic losses from natural catastrophes that are not covered by financial risk-transfer solutions remains well above 90%. But for highly vulnerable people in these regions especially, resilience against ever-greater weather risks is crucial for creating long-lasting prosperity. The Insurance Taskforce of the Sustainable Markets Initiative has put forward a framework to this end, which can form the basis for new public-private partnerships to support the Sustainable Development Goals defined by the United Nations.”

Bruce Carnegie-Brown, Chair of SMI Insurance Task Force and Lloyd’s, added: “The global insurance industry has a crucial role to play alongside private finance, international donors and sovereign agencies in addressing the needs of developing countries. This framework creates a vital opportunity for low- to middle-income countries to build resilience against increasingly frequent and severe weather risks, as well as driving sustainable societal and economic recovery post-disaster.”

The Framework is available on the Sustainable Markets Initiative website, and follows the publication of the Task Force’s Sustainable Products and Services Showcase, detailing the wide-ranging insurance support that is empowering customers to develop, invest in and scale their sustainability initiatives, supporting green innovation across multiple sectors and geographies.

* SMI Insurance Task Force Membership 

AIG: Peter Zaffino, President and CEO 
Allianz: Oliver Bäte, CEO 
Amwins: Scott Purviance, CEO 
Aon: Greg Case, CEO 
Ascot: Andrew Brooks, CEO 
AXA XL: Sean McGovern, CEO UK & Lloyd’s 
Axis Capital Holdings: Albert Benchimol, CEO 
Beazley: Adrian Cox, CEO 
ClimateWise: Dominic Christian, Global Chairman 
Conduit Re: Neil Eckert, Executive Chairman 
Direct Line Group: Penny James, CEO 
Hiscox: Bronek Masojada, CEO 
Howden Group: David Howden, CEO 
Legal & General: Nigel Wilson, CEO 
Lloyd’s: John Neal,CEO 
Marsh McLennan: Dan Glaser, President and CEO 
Munich Re: Joachim Wenning, CEO 
Phoenix: Andy Briggs, Group CEO 
Tokio Marine Kiln: Brad Irick, CEO 
Insurance Development Forum: Ekhosuehi Iyahen, Secretary General 
 
^ The SMI Insurance Task Force has put together a programme of deliverables to provide climate positive financing and risk management solutions through five workstreams:

1. Driving insurance product and services innovation
to empower commercial customers to develop, invest in and scale their sustainability initiatives, supporting green innovation across multiple sectors and geographies. As part of this initiative, the Task Force will launch at least two new insurance products to protect priority industries, such as nuclear energy, hydrogen and offshore wind, against an evolving risk landscape, in order to enable their accelerated growth. 
 
2. Implementing sustainable processes across the insurance supply chain
to encourage and incentivise individuals to take positive actions to live more sustainably. This will include launching an industry-wide framework to drive sustainable outcomes for customers, for example through introducing “build back better” claims clauses in home insurance policies to encourage customers to rebuild damaged properties with more sustainable materials in support of a net-zero transition. 
 
3. Establishing a public-private disaster resilience, response, and recovery framework
to help protect developing nations from the evolving economic and societal impacts of climate change, including the effects of increasingly frequent and severe weather events. The framework will leverage the insurance industry’s unique ability to combine an insurance product with risk management and loss recovery services, in order to increase preparedness for and limit the impacts of these events. Once developed, this solution will be rolled out across vulnerable countries to support better disaster response and recovery, with a pilot being initiated in 2021. 
 
4. Developing a framework for accelerating and scaling sustainable investment
to help unlock the global (re)insurance industry’s more than $30tn in assets under management, increasingly directing capital towards investments that drive climate-positive outcomes in both developed and developing nations. As part of this initiative, an investment proposal will be developed through collaboration between public and private sectors, with a particular focus on renewable energy and climate transition assets to enable the transition towards a low-carbon economy. 
 
5. Defining the industry’s ability to enable multi-sector transitions
through developing an approach to measuring the carbon footprint across underwriting portfolios and establishing a framework to track the global insurance industry’s ability to support the transition towards net zero across multiple industries and geographies. Over time, this framework can be scaled to incorporate additional data and metrics as these become available. 
 
Contact 
For further information, contact:
 
UK: 
+44 (0) 20 7327 5111 | pressoffice@lloyds.com
+44 (0) 20 7327 5391 | annie.roberts@lloyds.com
 
Americas: 
+44 (0) 20 7327 5111 | nathan.skinner@lloyds.com 
 
EMEA: 

+44 (0) 20 7327 5721 | elliot.maule@lloyds.com 
 
APAC:  
+65 6870 9227 | suganthy.selva@lloyds.com    
 
Sustainable Markets Initiative 
+44 7543 759 844 | l.round@sustainable-markets.org 
 
About Lloyd’s 
Lloyd’s is the world’s leading insurance and reinsurance marketplace. Through the collective intelligence and risk-sharing expertise of the market’s underwriters and brokers, Lloyd’s helps to create a braver world.  
 
The Lloyd’s market provides the leadership and insight to anticipate and understand risk, and the knowledge to develop relevant, new and innovative forms of insurance for customers globally.  
 
It offers the efficiencies of shared resources and services in a marketplace that covers and shares risks from more than 200 territories, in any industry, at any scale.  
 
And it promises a trusted, enduring partnership built on the confidence that Lloyd’s protects what matters most: helping people, businesses and communities to recover in times of need. 
 
The Future at Lloyd's sets out our strategy to build the most advanced insurance marketplace in the world. 
 
About Sustainable Markets Initiative (SMI)  
His Royal Highness, The Prince of Wales, launched the Sustainable Markets Initiative (SMI) alongside a 10-point action plan at Davos in January 2020.  The SMI is a network of global CEOs working together to build prosperous and sustainable economies that generate long-term value through the balanced integration of natural, social, human and financial capital. 
 
The SMI facilitates the development of responsible transition pathways at industry and business levels to decarbonize and achieve net-zero GHG emissions in addition to creating a Nature-positive future with a focus on biodiversity regeneration. The SMI Secretariat is supported by SMI’s corporate partners through a world-class secondment programme. Read more: www.sustainable-markets.org  
 
About HRH The Prince of Wales:  
For over 50 years, HRH The Prince of Wales has built a unique credibility by using his voice to advocate for action to tackle the climate and biodiversity crises including serving as Patron to dozens of environmental initiatives and organizations. The Prince’s first speech on the issue was in February 1970 when he spoke of the problems of throwing away materials such as plastics, and how we could make conservation cost effective.  
 
HRH was a lone but determined voice on this issue for many decades, but climate is now at the top of the international agenda. As the next Head of the Commonwealth, HRH has also been convening the 54 leaders of the Commonwealth to ensure the views of developed and developing countries alike are heard, and to focus on the green recovery, investment for sustainable transition and the opportunity for collective action across the Commonwealth, particularly across climate vulnerable and small island states. 
 
The Terra Carta 
Launched by His Royal Highness at the One Planet Summit in January 2021, the Terra Carta provides a practical roadmap for acceleration towards an ambitious and sustainable future; one that will harness the power of Nature combined with the transformative power, innovation and resources of the private sector. The Terra Carta serves as the mandate for the Sustainable Markets Initiative.  Currently there are over 300 CEO-level supporter supporters, including the first C40 city of Athens, Greece. 
 
HRH is appealing to public, private and philanthropic leaders around the world to join this endeavor as part of the ‘coalition of the willing’. Read more: www.sustainable-markets.org/terra-carta