The US Agency for International Development has agreed to provide funding to help develop WTW’s Resilience Wrapper, designed to de-risk loans to private enterprises from key climate risks.

With USAID funding, WTW will design a pilot facility enabling the US Development Finance Corporation to offer a parametric insurance solution that protects its direct loans to private enterprises from climate-related shocks. Following a triggering event (such as a cyclone, flood or drought), the subsequent loan repayment will be covered by the insurance payout.

Simon Young (pictured), senior director, Disaster Risk Finance and Parametrics, WTW, said: “Vulnerability to climate change and disaster risk can have a direct effect on the cost of borrowing, particularly in lower-income countries. This adds additional pressure on debt servicing capacity and increases the likelihood of debt default, which can lead to credit rating downgrades.

“With USAID funding, the WTW parametric solution will be a game changer for building the financial resilience of communities to extreme weather events by helping to unlock much-needed private sector investment in critical adaptation projects in climate vulnerable countries.”

---