Lloyd’s, the insurance and reinsurance marketplace, has unveiled a new disaster resilience vehicle in collaboration with the UN Capital Development Fund (UNCDF).
This initiative aims to provide disaster risk financing to small island developing states (SIDS) in the Pacific.
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The vehicle’s introduction, a collaborative effort between Lloyd’s, the UNCDF and Aon, aligns with the Sustainable Markets Initiative (SMI) Insurance Task Force’s pledge at COP26 to foster concrete support for climate-vulnerable nations.
Lloyd’s Disaster Risk Facility members back the Global Disaster Resilience Vehicle, which will utilise the global reinsurance market’s capacity to facilitate recovery and resilience.
It will combine donor funds designated for the region with local networks to supply exposure-based payments directly to communities at risk from climate impacts.
Lloyd’s CEO John Neal said: “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.
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By GlobalData“Establishing this new vehicle reinforces the crucial role Lloyd’s and the reinsurance industry plays in supporting communities within the Pacific Islands to respond and recover quicker from disaster.”
The initiative will capitalise on the global reinsurance market’s capacity, with Lloyd’s partnering with local industries to ascertain their resilience needs and secure the required capacity to provide coverage.
This could potentially double the insured amount from $1,000 to $2,000 per policy annually, offering up to 100% compensation for each disaster event.
Initially targeting Fiji, Papua New Guinea and Samoa, the vehicle is designed to respond to natural disasters such as tropical cyclones, earthquakes, tsunamis and floods.
The long-term goal is to replicate the vehicle across the Pacific, as well as in the Caribbean, Asia and Africa.
This development builds on the commitments outlined in a memorandum of understanding between Lloyd’s and the UNCDF in September 2023. Lloyd’s and Aon will assist in expanding the UNCDF’s existing programmes to bridge the protection gap for Pacific Island populations.
