Southeast Europe and the Caucasus countries stand to benefit from a grant to the World Bank backed catastrophe and weather risk reinsurance vehicle Europa Re. Europa Re was set up to help these countries develop their own catastrophe and weather risk insurance markets by providing a solid, backed, reinsurance vehicle and risk management tools, techniques and expertise.
Europa Re is the reinsurance vehicle of the South East Europe and Caucasus Regional Catastrophe Risk Insurance Facility Project (SEEC CRIF) which is operated by the World Bank (our article on its launch can be found here). The Special Climate Change Fund (SCCF), administered by the Global Environment Facility (GEF), is providing a $5.5m to fund the technical and regulatory work to develop catastrophe and weather risk insurance markets in Albania, FYR Macedonia, and Serbia.
The grant will support actuarial and probabilistic weather risk assessments for each country, necessary to help in the development of pricing and underwriting guidelines, regulatory work and also the acquisition of weather data for temperature and precipitation specifically to assist in the development of parametric weather risk insurance products.
The grant will also help in the creation of risk maps, climate risk models, and the creation of parametric weather risk insurance products. Temperature and precipitation indices will be created to support the parametric nature of this work and the resulting end products.
“The SCCF grant will enable Europa Re to finance the essential technical work required for the development of weather risk insurance markets in Albania, Serbia, and FYR Macedonia,” said Eugene Gurenko, World Bank Lead Insurance Specialist and task team leader of the program. “The SCCF funding will greatly assist Europa Re in its aim to mitigate the financial impact of climate change and catastrophes. Europa Re will offer easily accessible weather risk insurance products to local businesses, households, and government agencies. These products will reduce the financial impact of extreme weather conditions on earnings, livelihoods, and fiscal revenues.”
He added; “In addition, by applying highly sophisticated risk models in pricing and underwriting of weather risk, Europa Re will also reveal the cost of weather risk by location, and hence provide the critical information required by investors and policymakers for the purposes of making investments in mitigation and climate adaptation.”
Bonizella Biagini, manager of the Special Climate Change Fund (SCCF) said; “The SCCF is characterized for achieving climate resilience through the most cost-effective and innovative approaches. In the case of the CRIF, by engaging the private sector and providing innovative insurance products, these countries will be able to cope with the severe impacts of climate change which are also becoming less predictable. The project will enable local businesses and populations to buy state-of-the-art catastrophe and weather risk insurance product, at affordable costs”.
Europa Re is also backed by funding from World Bank, the United Nations International Strategy for Disaster Reduction (UNISDR), and the Swiss State Secretariat for Economic Affairs (SECO). Once fully established this reinsurance facility and the resulting parametric insurance products could make a real difference to risk management in this region.
You can read more details on this project on the World Bank website.