The main four parametric natural disaster insurance risk pools have committed to a unique collaboration, which will see them explore the creation of a joint risk finance and reinsurance platform.
This initiative, aimed at expanding global climate risk protection, brought together representatives from African Risk Capacity Ltd. (ARC), CCRIF SPC, SEADRIF Insurance Company, and the Pacific Catastrophe Risk Insurance Company (PCRIC), meeting at The Rockefeller Foundation Bellagio Center in late February.
The discussions centered on the systemic barriers currently hindering the scale of climate insurance.
“We had honest discussions about what is constraining scale today: a persistent undervaluation of insurance in climate finance, with few targets or metrics for protection coverage; fragmented capital, short reinsurance cycles, pricing volatility, and limited integration into fiscal planning. Protection will not scale until we build new forms of capital structure, coordination, and political ownership,” SEADRIF commented.
Adding: “We explored how catalytic public capital can work alongside private markets, and how better coordination across regional risk pools, including the potential role of a joint reinsurance platform, could support more stable risk capacity.”
In response, the four pools have entered a joint design phase to develop a shared risk finance and reinsurance platform.
This phase will investigate how coordinated capital, unified reinsurance structures, and shared technical platforms can operate across regional and global scales.
PCRIC also stated that such a platform would enhance the current collaboration among the four pools, while also aiming to reduce costs and expand coverage for member countries.
It is quite significant, as a collaborative parametric reinsurance facility has the potential to offer synergies and cost efficiencies on risk transfer, considering the diversification present within the overall risk pool and economies of scale.
Additionally, if this approach were adopted, it could enhance the prominence of their collective reinsurance purchase, growing its size at the same time, thereby increasing its relevance to risk transfer solutions associated with the capital markets and potentially making insurance-linked securities (ILS) such as catastrophe bonds more viable as a diversifying source of protection.
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