Disaster Risk Finance

Based on our climate and disaster risk analysis, we help assess the impacts of natural hazards across geographic locations, sectors, ecosystems and vulnerable population segments to develop a comprehensive view of risk. We work with you to identify appropriate disaster risk management strategies using an integrated approach that links disaster risk reduction, preparedness and response with longer-term recovery and reconstruction efforts. We also provide strategic advisory around the feasibility of various disaster risk finance instruments.

We work with you to translate financial exposures to natural hazards into tailor-made disaster risk finance instruments, including parametric insurance, forecast-based finance and other innovative instruments. Our services span risk assessment, hazard analysis and designing instruments such as parametric indices and triggers. We support financial structuring, offer advisory services on deploying funds and insurance delivery structures and channels, as well as capacity strengthening. We also work with you on placing and servicing your policy, including claims settlement and calculation agent services, working with our Alternative Risk Transfer team.

We provide strategic and technical advisory around hazard assessment, needs estimation, DRF strategy formation, parametric product development and placement, and other appropriate disaster risk finance strategies, including sub-national, regional, and international risk pooling.

We provide advisory to support institutional and operational shock resilience. We support cost-effective disaster risk management, working closely with humanitarian organizations and partners to better link financing for anticipatory action, preparedness and rapid response. We develop shock-responsive social protection schemes through bespoke parametric solutions and mobilizing additional resources from private risk and capital markets.

We design ‘resilience wrapper’ parametric insurance cover to protect sovereign, private and corporate debt from defined natural hazard risks, providing payouts to cover debt servicing obligations in the event of a trigger. We can link these parametric solutions to a current or new debt issuance, or consider these as part of a debt swap. The trigger will be related to the natural hazards most likely to severely impact debt servicing capacity, for example, hurricanes and cyclones in the Caribbean and Pacific Small Island Developing States.

We develop parametric solutions to enhance the resilience of ecosystems, including coral reefs, mangroves and forests impacted by severe climate hazards such as tropical cyclones and wildfires. We also design financial protection solutions that safeguard livelihoods dependent on ecosystem services, such as coastal communities, fishers and the tourism industry.

Challenge: Central Asia countries face a significant disaster risk funding gap and lacked a regional risk pooling mechanism.

Solution: We collaborated with the Asian Development Bank (ADB) and the Central Asia Regional Economic Cooperation (CAREC) to enable the development of a regional disaster risk insurance facility covering the CAREC member states (11 Central Asian countries). This involved conducting risk and protection gap assessments, potential insurance and/or capital market product development, roadmaps to creating a pool facility and/or placing and pricing a disaster relief bond for clients, and creating a visualization tool for member states.

Impact: The project acted as a catalyst for in country discussion of hazard, exposure and vulnerability to three hazards: flood, earthquake and infectious disease. CAREC member states have asked the ADB to use the project’s roadmap to create a disaster risk facility, with the option to issue a Disaster Relief Bond.

Challenge: While the Pacific Island countries and territories face climate and natural hazards that could devastate their small and undiversified economies, they have very limited access to disaster risk financing tools able to support resilience.

Solution: PCRIC is one of four regional sovereign risk pools created on a mutual basis to offer parametric DRF instruments to member governments and other entities operating for the public good. We supported PCRIC in developing and underwriting a range of new-to-market products, including drought insurance at the sovereign level, reef insurance for a Fijian conservation foundation and earthquake insurance for the state-owned telecoms network operator in Papua New Guinea (PNG).

Impact: PCRIC has a mandate to support its sovereign member governments to build resilience against climate and other natural disasters. Our technical partnership brings advanced modeling and analytics as well as a great depth of experience with risk pools able to better protect natural assets and communities. The drought product will enable pre-arranged financing for response to water security events before they become disasters, while the reef insurance supports not only conserving critical natural assets but also community resilience in the remote Lau islands. The parametric insurance in PNG can deliver quick financing at scale to minimize the disruption to the country’s critical fiber-optic cable network after impactful earthquakes.

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Challenge: The Municipality of Medellín needed effective disaster risk financing products to support emergency response actions.

Solution: We developed parametric insurance products tailored to Medellín's specific hazard context, following research on flood, earthquake and landslide perils. We worked to analyze data and provide educational workshops on insurance in disaster risk finance.

Impact: The parametric insurance products and educational workshops we helped develop significantly improved Medellín's risk management capabilities, enhancing its capacity to negotiate and manage parametric insurance products.

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Challenge: UNICEF recognized how children and youth are among the most vulnerable populations affected by cyclones and needed innovative financing solutions to enhance their resilience.

Solution: In collaboration with UNICEF, we co-designed a unique parametric insurance program providing rapid post-disaster funding for UNICEF to support vulnerable children, youth and their parents. It covers cyclone risk across Bangladesh, Comoros, Fiji, Haiti, Madagascar, Mozambique, Solomon Islands and Vanuatu and incorporates child and youth-responsive exposure and risk analysis.

Impact: The parametric insurance program enables UNICEF to support its efforts in protecting millions of vulnerable children, youth and parents in cyclone-prone regions, ensuring critical help reaches those in need promptly.

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Challenge: The eastern Caribbean region aims to improve its capacity for disaster risk management and preparedness for hurricanes.

Solution: In collaboration with the Overseas Development Institute (ODI Global) and the International Federation of the Red Cross (IFRC), we conducted a feasibility study for a forecast-based financing (FbF) mechanism. The study provided recommendations for improving disaster risk management capacities, including feasible actions and alternative finance mechanisms.

Impact: The study laid the foundation for more effective preparedness and response to hurricanes in the eastern Caribbean region, enhancing its resilience to these natural disasters.

Challenge: Belize faced the challenge of servicing its public debt while dealing with climate disasters and the COVID-19 pandemic.

Solution: The Nature Conservancy, along with Credit Suisse, assisted the Government of Belize to convert their outstanding privately held debt, amounting to more than $500 million USD, resulting in the issuance of a 20-year blue bond. The blue bond was protected by a resilience wrapper we designed and placed, along with political risk insurance provided by the U.S. Development Finance Corporation.

Impact: The debt conversion resulted in a reduction in the cost of capital and an increase in Belize’s sovereign credit rating, supporting its long-term sustainable development priorities and enhancing its resilience. If a trigger event occurs, the payout goes directly to debt servicing, giving Belize fiscal space to provide necessary humanitarian support.

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Challenge: The Mesoamerican Reef is increasingly impacted by damaging hurricane events. Without dedicated budgets, reef response is difficult to mobilize quickly in the aftermath of such events.

Solution: Our team worked with the Mesoamerican Reef (MAR) Fund to develop a parametric insurance program to provide coverage for key reef sites across Mexico, Belize, Guatemala and Honduras. Project work included modeling historic and future synthetic hurricane winds across the reefs, designing an appropriate trigger structure and placing in re/insurance markets.

Impact: The insurance program ensures resources are available for immediate reef recovery efforts following a damaging hurricane. If a given cyclone intensity threshold is exceeded in the vicinity of a selected reef area — as measured by wind speed as an appropriate proxy for tropical cyclone damage — this triggers the release of funds to the MAR Fund. MAR Fund then directs funds to trained local reef response teams responsible for clearing debris, reattaching broken corals and conducting reef damage assessments to mitigate post-event damage and kick-start reef recovery.

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