The Prince of Wales’ Sustainable Markets Initiative’s (SMI) Insurance Task Force (ITF) has announced the launch of an adaptable and scalable framework designed to improve disaster resilience in low-to middle-income countries.
The Disaster Resilience Framework for Climate-Vulnerable Countries highlights the opportunity to combine public and private sector investment with insurance to drastically improve disaster resilience for some of the world’s most vulnerable.
Announced as world leaders meet in Glasgow at COP26, the framework focuses on those most at risk from climate-exacerbated extreme weather events, such as droughts, flooding, tropical cyclones, convective storms, and wildfires.
It emphasises the unique opportunity for multilateral development banks, international aid donor and the private sector to collaborate to establish large scale, repeatable, efficient and high impact financing and risk mitigation solutions for developing countries.
Dominic Christian, Global Chairman, Aon Reinsurance Solutions and Chairman ClimateWise, commented: “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.”
According to the new framework, pre-arranged public/private sector financial assistance could be structured and delivered alongside risk knowledge and mitigation, which would ultimately help to protect these regions from the devastating and lasting impacts of extreme weather events.
Joachim Wenning, Chair of the Board of Management of Munich Re, said: “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.”
Currently, the SMI Insurance Workstream is working with agencies in Kenya in order to pilot the framework and demonstrate its potential. Together, they are developing a novel approach to bring private sector resources to support more resilient agriculture across the drought and flood prone country.
The ITF says that one of the initiatives being explored is 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.
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.”
