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Hannover Re backs parametric disaster fund for developing markets

9th December 2019 - Author: Matt Sheehan

Hannover Re has committed $50 million of capacity to a new risk transfer fund for natural disasters, developed in partnership with the German government and Global Parametrics, a provider of parametric protection in developing markets.

The NDF Deutschland has also secured initial commitments of €25 million from the German Federal Ministry for Economic Cooperation and Development (BMZ).

Managed by the Global Parametrics team, the fund will target investments in risk-transfer instruments exclusively relating to natural catastrophes and climate risks in developing markets.

The fund follows on from and will partner with, the NDF UK, which was launched in January 2018 with £25m of committed capital from the UK’s Department for International Development (DfiD).

The commitment from Hannover Re in particular is expected to underline the opportunity for private sector investors to participate in disaster risk-financing in untapped markets, the parties said.

“Hannover Re’s commitment to make contributions to close the protection gap is an important element of our sustainability strategy,” explained Henning Ludolphs, Managing Director Retrocession & Capital Markets at Hannover Re.

“Our experience has shown that innovative parametric concepts with fast claims payment processes are most effective when it comes to mitigating the impact of natural disasters that are particularly devastating in low-and-middle income countries,” Ludolphs continued.

“At Hannover Re, we are convinced that a wide range of partnerships is paramount in order to reduce the protection gap. Therefore, we are more than happy to support the Natural Disaster Fund, not only with additional risk capacity, but also with our expertise.”

Hector Ibarra, CEO of Global Parametrics, also commented: “Extreme weather and natural disasters are a key cause of an endemic poverty cycle in many developing markets and with the onset of climate change, the situation can only get worse.”

“Global Parametrics, through its Natural Disaster Funds and commercial partnerships, is proud to champion a systemic change by providing both the innovative products and access to risk capital to organisations that directly impact the lives of those on the ground,” Ibarra went on.

“The successful mobilisation of funding for the NDF demonstrates the confidence our deeply experienced investors feel both in our team, our pipeline and in the potential of this approach to deliver measurable impact outcomes alongside commercial returns.”

“We are delighted that the NDF’s investors share our vision for creating sustainable financial solutions for disaster resilience in developing markets and are grateful to them for placing their trust in our proposition.”

And finally, Maria Flachsbarth, Parliamentary State Secretary to the Federal Minister for Economic Cooperation and Development (BMZ), commented: “The NDF is an innovative mechanism that brings together public and private insurance players for the benefit of poor and vulnerable people who far too often face a protection gap.”

“While about 50 percent of disaster losses are covered by insurance in high-income countries, the corresponding proportion in poorer countries is less than five percent,” she added. “The BMZ is committed to help closing this gap through a substantive contribution to the NDF.”

“In doing so, the NDF will play a crucial role to achieve the targets of the InsuResilience Global Partnership’s new Vision 2025 that was presented at the UN Climate Action Summit in September. Over the next six years, the Vision aims to cover 500 million poor and vulnerable people against disaster and climate shocks through pre-arranged risk finance and insurance mechanisms.”

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