South East Europe and the Caucasus gain access to catastrophe risk insurance facility

Homeowners, businesses, farmers and government agencies in Southeast Europe and the Caucasus will in future have access to more affordable natural disaster and weather insurance thanks to a World Bank financing. The World Bank has approved loans of $5m for Macedonia and Serbia as part of the South East Europe and Caucasus Regional Catastrophe Risk Insurance Facility Project (SEEC CRIF).

Through this World Bank project countries in this region will gain access to innovative financial protection against climate change and natural disaster losses. Now these first two countries have been funded to enable them to join the catastrophe risk facility it is expected that the World Bank will follow up by funding Bosnia and Herzegovina, Georgia, and Montenegro to join a second phase. Albania has already joined the facility under a separate funding agreement.

This are of Southeast Europe and the Caucasus is prone to disaster such as flooding, heavy rainfall, drought in summer and earthquakes. Governments in the region do not have the finances to assist in the event of a major event such as an earthquake so this facility is designed to help the recovery happen more quickly.

The catastrophe facility enables these countries to access the Europa Re specialty catastrophe reinsurance vehicle by financing their contributions. Europa Re will in turn enable them to develop catastrophe insurance markets in their own countries. The end result is that local people and businesses can purchase catastrophe and weather cover at reasonable prices.

“Households, farmers, SMEs, and other businesses exposed to weather-related risks and geological hazards will have access to affordable disaster insurance providing a financial safety net following catastrophic events,” said Alison Cave, co-task team leader of the World Bank team that designed the program. “In the event of a major flood or earthquake, the program will directly protect some of homeowners’ lifetime savings embedded in home equity while indirectly protecting the banking and mortgage industries. The enterprise sector will be able to access disaster insurance supported by the Facility to protect their earnings from adverse weather, thereby adapting to climate change, reducing the cost of borrowing, and improving equity valuations and access to credit”.

The program also aims to assist the countries by providing technical assistance on issues such as:

1. Risk mapping and modelling for participating countries
2. Design and pricing of appropriate catastrophe risk insurance products
3. Small weather monitoring stations to support parametric weather insurance
4. Technical assistance for regulatory and policy reforms to create an enabling market environment

“It is expected that the program will help further develop the national insurance companies,” said Eugene Gurenko, the co-task team leader of the Program. “The financial sector in the countries will be strengthened by the SEEC CRIF, which will boost national insurance industries—creating new clients, additional premium income, improved access to global reinsurance markets—and, most importantly, to developing national catastrophe and weather risk insurance markets”.

You can read more details on this project on the World Bank website.