Bermuda company is a party to COP 27 pact
An African risk insurance pool set up as a hybrid mutual insurance company in Bermuda is among the parties to a ground-breaking memorandum of understanding signed at the United Nations Climate Change Conference in Egypt.
The agreement at COP27 among African Risk Capacity Limited, CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) and Pacific Catastrophe Risk Insurance Company strengthens the reach and impact of the world’s risk pools by formalising and establishing a framework for enhanced co-operation and partnership.
Isaac Anthony, CCRIF CEO, said: “This is an opportunity to take risk pools to the next level so that these are not just seen as insurance or mechanisms for transferring risk, but also are viewed as tools to scale up disaster risk finance in a very significant way to enable governments to provide higher levels of financial protection for their populations, including the most vulnerable.”
Mr Anthony said that the MOU paves the way for the three risk pools to collaborate on sharing best practices in parametric insurance models, developing new and innovative disaster risk financing instruments and undertaking joint initiatives focused on advocacy, capacity building and training.
He added: “One of the exciting things CCRIF is looking forward to is facilitating access to other types of DRF instruments. It will be important, for example, for the various risk pools to work collaboratively in engaging Global Shield, for example, to ensure that the role of risk pools is recognised in that particular effort.”
Global Shield against Climate Risks, the joint initiative of the G7 and the V20 Group of 20 vulnerable countries, was launched at COP27.
Its launch had been long awaited, says Lesley Ndlovu, ARC Ltd CEO.
It is one of the tangible achievements of the Egypt event, he says, which will “transform the DRF landscape”.
Mr Ndlovu added: “The Global Shield is an essential element in helping risk pools scale up their efforts to make insurance more accessible, affordable and available to the people who need it the most in the face of increasing frequency and severity of natural disasters.
“The signing of this MOU among the global risk pools sets the tone for a higher level of collaboration and a strong foundation on which to strengthen each other and our efforts and initiatives going forward.”
The MOU includes the development and sharing of best practices in parametric model development and management, as well as data management relating to parametric insurance instruments.
Advocacy and capacity building will form a key component of joint activities to help raise understanding of the role of risk pools as development insurance facilities supporting economic and social development objectives of risk pools’ member countries.
As loss and damage continue to rise and developing countries struggle to fund insurance premiums, member countries recognise that insurance provided by these risk pools is a critical financial resilience mechanism which protects them against the impact of perils and helps them meet the rising cost of disasters fuelled by climate change, which is largely not caused by their own actions.
However, there are barriers to scaling up DRF, said PCRIC CEO Aholotu Palu.
“While risk pools play an important role in moving the management of disaster and climate shocks away from ad-hoc humanitarian assistance and focus the DRM ecosystem on an ex-ante approach, there is still somewhat a lack of understanding of the role we play in helping countries protect their financial means to build resilience and shield themselves from loss and damage caused by climate change.
“Through the signing of this MOU, we elevate collectively the role we play in helping countries fight the impact of climate change.”
ARC Insurance Company Limited was set up in Bermuda in 2013 to serve 35 African Union member states. It was the first African risk insurance pool, reducing governments’ reliance on external emergency aid.
It is a financial affiliate of the African Risk Capacity, a specialised agency of the AU, an initiative designed to improve current responses to climate-related food security emergencies.
In 2007, the Caribbean Catastrophe Risk Insurance Facility was formed as the ﬁrst multi-country risk pool in the world and was the ﬁrst insurance instrument to successfully develop parametric policies backed by both traditional and capital markets.
CCRIF SPC limits the ﬁnancial impact of natural hazard events to Caribbean and Central American governments by quickly providing short-term liquidity when a policy is triggered. CCRIF offers parametric insurance policies for tropical cyclones, earthquakes, excess rainfall, the ﬁsheries sector and the public utilities sector.
CCRIF currently has 24 members.
PCRIC is owned for the benefit of the island nations of the Pacific and is a specialist provider of disaster risk finance services and solutions to the region.
It delivers a programme of support built on leading-edge technical assistance, targeted collaborations, and innovative product options. Its mission is to help nations better prepare, structure and manage finances to foster disaster resilience and ensure rapid access to funds when they are needed most.