Lloyd’s has developed a disaster resilience vehicle with the United Nations Capital Development Fund to deliver disaster risk financing to Small Island Developing States in the Pacific.

The launch of the vehicle, developed in partnership with Aon, supports the Sustainable Markets Initiative Insurance Task Force’s commitment made at COP26 to drive action to support the resilience of climate vulnerable countries.

Leveraging capacity from the global reinsurance market, Lloyd’s will work with the local industry to identify their resilience needs and secure the necessary capacity to deliver coverage. This could mean doubling the total amount insured from US$1,000 to US$2,000 per policy per year, with up to 100% compensation per event.

Initially covering Fiji, Papua New Guinea and Samoa, the vehicle will respond to disasters caused by natural perils including tropical cyclone, earthquake, tsunami and flood – with the long-term aim of scaling and replicating the vehicle throughout the Pacific region as well as the Caribbean, Asia and Africa.

Lloyd’s and Aon will also support the scaling up of the UNCDF’s existing programmes to close the protection gap for the populations in the Pacific Islands.

John Neal, Lloyd’s CEO, 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. Establishing this new vehicle reinforces the crucial role Lloyd’s and the re/insurance industry plays in supporting communities within the Pacific Islands to respond and recover quicker from disaster.”

Pradeep Kurukulasuriya, executive secretary, UNCDF added: “UNCDF has a unique mandate to provide blended financing instruments to emerging economies, including climate-vulnerable SIDS to development challenges like impact of climate change and extreme weather events. Through a combination of grants, guarantees and concessional loans, UNCDF through its climate risk insurance programme partners, aims to support local market ecosystems to deliver sustainable solutions at the last mile to build the resilience and preparedness of vulnerable communities.

"We are committed to working with the insurance and reinsurance industry to establish this investment vehicle that will be tested in the Pacific, replicated and scaled to other markets.”

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