Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Swiss Re were behind Malawi weather risk deal


Swiss Re have come out as the company behind the Malawi-World Bank weather derivatives deal which I wrote about last week. In a press release on the Swiss Re website they say:

Swiss Re announced that it has entered into a weather derivative contract with the International Development Association (IDA), the arm of the World Bank that helps the world’s poorest countries. Under the terms of the contract, Swiss Re will pay out up to USD 5 million in the event that Malawi’s farmers suffer from a drought-related shortfall in maize production. With this transaction, the IDA backs its first-ever weather derivative contract with the Government of Malawi.

”The weather derivative contract with the World Bank is a prime example of an ex-ante disaster risk management strategy designed to mitigate the financial impact of drought for a country such as Malawi that is heavily dependant upon the income from its agricultural production,” said Juerg Trueb, Swiss Re’s Head of Environmental and Commodity Markets.

The World Bank, working together with the Government of Malawi, structured the contract as an option on a rainfall index. The index links rainfall and maize production, so that if precipitation falls below a certain level the index will reflect the value of the projected loss in maize production. The maximum payout is reached if maize production drops to 10% below the historical average.

“This weather derivative contract is just one instrument as part of a World Bank effort to deliver customized financial solutions and help members plan efficient responses to catastrophic events. The use of weather derivatives are most effective as part of a broader risk management strategy,” said Gloria Grandolini, Director of the World Bank Treasury’s Banking and Debt Management Department.

Juerg Trueb concluded: “The execution of the contract between the World Bank and Swiss Re demonstrates the ability and the interest of the international risk transfer markets to absorb such risks.”

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.