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.