Bermuda reinsurers play role in establishing disaster backstop
Bermuda-based reinsurers Hiscox and RenaissanceRe have participated in funding an insurance backstop for the International Federation of Red Cross and Red Crescent Societies to ensure funds are immediately available when a disaster occurs.
The IFRC said it had collaborated with broker Aon, the Lloyd’s Disaster Risk Facility and the Centre for Disaster Protection to create a risk transfer mechanism which would ensure swift and agile support is available when a disaster occurs. The tool provides a backstop for the IFRC's Disaster Response Emergency Fund.
ICRF said DREF has proven to be the simplest, fastest, most transparent and localised way for member National Societies to access reliable international, short-term emergency funding for community action in all kinds of disasters when needs surpass the resources available at the national level.
“The new insurance backstop will be a critical safety valve for DREF’s life-saving work, ensuring the DREF can continue to meet the needs of today while standing ready for the crises of tomorrow,” the IFRC said.
“IFRC’s ambition is to grow the fund every year to reach 100 million Swiss Francs in 2025. Currently there is an alarming increase in small and medium-scale emergencies, and funding may not always be available when needed.
“The new insurance tool provides DREF with contingency funding of up to 20 million Swiss Francs. Essentially, once DREF’s allocated funding for natural hazards hits 33 million Swiss Francs, the reinsurance is triggered to replenish DREF’s reserves.
“By transferring risk from strained public balance sheets to the private sector, DREF is now able to respond more flexibly and effectively, with the potential to reach an additional 6 million vulnerable people each year. The reinsurance acts as a safety net for DREF, ensuring that extra funds are available and ready to provide aid to vulnerable communities, even during periods of increased demand.”
The capacity for the reinsurance deal was offered by the three founding members of the London-based Lloyd’s Disaster Risk facility, as led by Hiscox alongside Chaucer and RenaissanceRe, with Fidelis MGU completing the placement as the sole representative of the Bermuda market.