Howden, a specialist insurance broker, plans to promote the use of innovative financing models to help plug the $20bn disaster relief funding gap.
Howden presented a case for creating sustainable business models that provide more funding, more quickly and efficiently and that can be applied to all kinds of disaster relief projects at the World Climate Summit in November 2021.
According to a press release Howden group CEO David Howden in his keynote address at the summit spoke on how, by adapting existing models to respond to emerging challenges, the insurance industry has the power to create markets that drive climate action and increase resilience in an increasingly volatile world.
In early 2020 the insurance broker had collaborated with the Danish Red Cross and others on the world’s first volcano CAT bond. Under this new model, humanitarian aid funds are raised in advance and stretch up to 20 times further than traditional funding methods, whilst offering uncorrelated returns for investors.
Should any of the 10 named volcanoes covered under the bond erupt within the next three years, up to $3m will be released immediately to the Danish Red Cross. No time is lost assessing the cost of recovery; as soon as the parametric triggers are hit, the pre-agreed funds are released.
Howden head of climate risk and resilience Charlie Langdale said, “We believe the answer to plugging the funding gap lies in creating scalable, sustainable markets for funding disaster response by unlocking private capital for social good.”
Mr Howden said, “Insurance tends to come into focus in two main areas: picking up the pieces after a disaster has happened, and the debate around whether insurers should continue to underwrite business for carbon intensive industries.
“What’s missing in this conversation and what our industry must get better at promoting, is the role insurance has to play in helping society to build resilience against climate risk. Whether that’s by removing the financial barriers to sustainable energy projects; leveraging our data and risk modelling capabilities to help clients, industries and countries to better address emerging risks; or by transforming the way disaster relief is funded.” M