Lloyd’s establishes first of its kind disaster resilience vehicle with United Nations Capital Development Fund

24 Oct 2024

Lloyd’s, the world’s leading marketplace for insurance and reinsurance, has today announced a new, pioneering disaster resilience vehicle with the United Nations Capital Development Fund (UNCDF) to deliver disaster risk financing to Small Island Developing States (SIDS) in the Pacific.

The launch of this groundbreaking vehicle, developed in partnership with the UNCDF, Lloyd’s, and Aon, 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.

Supported by members of Lloyd’s Disaster Risk Facility, the Global Disaster Resilience Vehicle will enhance recovery and resilience, utilising the global reinsurance market as a capacity provider. The vehicle will leverage donor funds committed to the region and utilise local networks to provide exposure-based payments directly to climate-vulnerable communities.

Leveraging capacity from the global reinsurance market, Lloyd’s will work in partnership with the local industry to identify their 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.

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.

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 programmes to close the protection gap for the populations in the Pacific Islands.

The announcement comes as part of the Commonwealth Heads of Government Meeting (CHOGM) in Samoa, where private sector leaders gathered this week to discuss the sustainability and resilience challenges facing Commonwealth countries, and the practical solutions to support resilience-building initiatives in the communities most affected by climate change.

During CHOGM, Lloyd’s will join fellow SMI CEOs to present the vehicle to His Majesty King Charles III, founder of the SMI as The Prince of Wales, and outline further support of lighthouse project initiatives led by the group.

“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.”

John Neal, Lloyd’s CEO

“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.”

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. 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.”

Pradeep Kurukulasuriya, Executive Secretary, UNCDF

Notes to Editors

As Chair of the Sustainable Markets Initiative’s Insurance Task Force (ITF), Lloyd’s will be representing the voice of the insurance industry at the Commonwealth Business Forum to showcase the innovative risk transfer mechanisms in existence and under development within the insurance industry to provide disaster resilience in climate-vulnerable communities.

The Global Disaster Resilience Vehicle enables access to additional financial resources and mobilises capital during periods of extraordinary need or crisis.

Key benefits of the new vehicle for the local economy are:

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; improve product penetration
UNCDF: Support to leverage current programme to improve impact with private sector support that will be sustainable
Donors: greater impact for the committed funds through localisation 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.
UNCDF is the only UN entity capable of mobilising blended finance solutions with the potential to unlock resources for sustainable development in underserved markets.
Premium financing will be through a loan facility initially started by UNCDF but to be ultimately financed by private sector (banks).
Read more about our partnerships with the UNCDF:

United Nations Capital Development Fund and Sustainable Markets Initiative Insurance Task Force partner to scale insurance access for climate-vulnerable countries

Lloyd’s and the UNCDF to run parametric insurance training in climate vulnerable countries

Enquiries to

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pressoffice@lloyds.com

+44 (0) 20 7327 5111

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