The International Federation of Red Cross and Red Crescent Societies has partnered with Aon, Lloyd’s Disaster Risk Facility and the Centre for Disaster Protection to launch a new risk transfer mechanism to ensure that rapid support is available when a disaster occurs.

The tool provides a backstop for the IFRC's Disaster Response Emergency Fund. DREF is intended to be a simple, fast, and transparent way for IFRC's member national societies to access short-term emergency funding for community action in all kinds of disasters when needs surpass the resources available at the national level.

Andrew Mitchell, Minister of State for Development and Africa, Foreign, Commonwealth and Development Office UK, said: “Climate change is devastating the lives of millions around the world. With natural disasters on the rise, this innovative new insurance will provide extra funding for life-saving emergency assistance. This is UK expertise at its best – funding from the UK, insurance purchased through the City of London and technical support from the Centre for Disaster Protection.”

IFRC’s ambition is to grow the fund every year to reach US$116m in 2025. It says that currently there is an alarming increase in small and medium-scale emergencies, and funding may not always be available when needed. The new insurance tool provides DREF with a contingency funding of up to US$23m. Once DREF’s allocated funding for natural hazards hits US$38m, the reinsurance is triggered to replenish its reserves.

John Neal, Lloyd’s CEO, added: “Insurance has a vital role to play in building society’s resilience against climate-related risks, acting as a backstop when the worst happens, and a buttress for preparedness in the meantime. This innovative response tool builds on the work of our Disaster Risk Facility and shows what our market can do when we collaborate with our partners in government to close global insurance gaps and mitigate the human and financial impacts of natural catastrophes.”

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