Swiss Re and USAID have announced a three year partnership with one of their main aims being to reduce the costs of natural disasters in the Americas, Africa and Asia. By enabling better access to customized, market based insurance products they hope to help farmers and families become more resilient to the impacts of droughts, floods and severe weather events.
USAID Administrator Rajiv Shah said; “Swiss Re has been an industry leader in the development of innovative new products to address weather related risks. We welcome this opportunity to join forces to develop affordable, market-based tools to reduce climate vulnerability in poor communities.”
“Building insurance capacity in developing countries is a critical step to limiting the vulnerability to extreme weather events that impact so many livelihoods,” said Walter Bell, Chairman of Swiss Re America Holding Corporation. “Swiss Re’s innovative solutions, combined with USAID’s technical expertise and extensive development experience, will bring advanced risk management solutions to the communities who need them most.”
This kind of commitment to microinsurance efforts in developing nations are essential to help raise the levels of insurance penetration currently seen. As take up of microinsurance and weather index insurance grows, helped by initiatives like this, there is also going to be a need to reinsure those programs and the risks could be suitable for issuance to the capital markets in future due to the direct links between the risks and weather indices. With the lowest level insurance products being tied to actual weather conditions it will make it easier to tie reinsurance, retro and capital markets risk transfer products to weather indices as well. This could facilitate a growing need for risk transfer in the future as the volume of insurance of this type grows.