The Natural Disaster Fund (NDF), a public-private partnership managed by Global Parametrics, a CelsiusPro Group company, has gathered increased recognition for its innovative approach to provisioning parametric risk transfer coverage in fragile states.
By providing parametric risk capacity, the NDF helps support local and international actors in offering risk transfer solutions to climate-vulnerable communities,
With the supply side covered and the argument of its success proven, the challenge now lies in ensuring its long-term sustainability. How can the fund continue to attract the support and premium necessary to make tools like parametric insurance become a mainstream instrument, rather than being seen as separate from broader climate finance initiatives?
This critical question was a key topic of discussion during a panel at the launch of the NDF Impact Report 2024, held during London Climate Action Week.
The report highlights the fund’s growing reach and relevance: 36.3 million poor and vulnerable beneficiaries have received coverage; USD 61 million in private sector capacity has been leveraged; and USD 20.9 million in payouts have been successfully triggered.
“Designed for speed, equity, and scale, the NDF continues to demonstrate what’s possible when pre-arranged risk transfer solutions are deployed through trusted, cross-sector collaboration,” the organisation stated.
The NDF’s model is proving to be a convincing proposition for reinsurers. At the event, Henning Ludolphs, Managing Director at Hannover Re, emphasised the enthusiasm within his organisation for engaging with such initiatives.
“With Hannover Re, there are quite a lot of people who are eager to work on these things,” Ludolphs stated, highlighting the reinsurer’s commitment to reducing the protection gap as part of its sustainability strategy.
The executive also pointed out the long-term benefits for reinsurers. While individual limits may be small, the risks presented by the NDF are not the “traditional ones”.
He commented: “It’s not like following a hurricane, it’s not a California earthquake, these are diversifying risks, which is very important for a reinsurer to build up a worldwide portfolio. So, there are a number of reasons to be supportive here.”
Reflecting on the years advocating for pre-arranged disaster financing, Rowan Douglas, CEO, Climate Risk & Resilience at re/insurance broker Howden, expressed that there has finally been a shift in the market, from scepticism to understanding and welcoming.
He said: “Ten years ago, maybe even five years ago, in making the intellectual case, the intellectual argument for why pre-arranged disastrous financing insurance made good sense – in terms of understanding risk, in planning, in budgeting – was still difficult. There was a degree of scepticism, a vast prejudice. But over the last two or three years, that seems to have almost evaporated.”
Douglas highlighted the significant progress made on the supply side, with “technical assistance facilities,” increased capacity from the NDF and growing private sector involvement.
The challenge now, he explained, is to “fuel that tank with support and premium, to make it a mainstream disastrous financing, a mainstream instrument, and to not see this as separate to climate finances, that it’s all part of the same mix.”
Melinda Bohannon, Director General, Humanitarian and Development at the Foreign Commonwealth & Development Office (FCDO), has observed that there has been a shift in thinking about development, moving beyond faddish solutions.
“I think we’ve ended that phase and we’re now into an important new phase in how we think about development,” Bohannon stated. This is partially driven by partner governments and local organisations asking for different approaches, as well as political leaders – like UK Foreign Secretary David Lammy – seeking “a different approach to how we’re thinking about these things.”
They are challenging development actors to consider modern partnerships that reinforce economies, leverage UK assets and expertise, and embrace innovation, particularly in financial services.
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