The International Federation of Red Cross and Red Crescent Societies (IFRC), in collaboration with Aon, Lloyd’s Disaster Risk Facility and the Centre for Disaster Protection, is launching a disaster response fund.
The transaction has been completed through a Guernsey special-purpose vehicle (SPV) managed by Aon and uses other Guernsey vehicles in its structure.
The new insurance tool provides the IFRC’s Disaster Response Emergency Fund (DREF) with contingency funding of up to £18m.
Paul Sykes, managing director at Aon Guernsey, said the achievement was the Guernsey insurance industry’s “finest hour yet” as it will allow the Red Cross, potentially, to reach an additional six million people each year.
“It is another watershed moment for the industry, demonstrating that it can address the protection gap and rising humanitarian needs,” he said.
Once DREF’s allocated funding for natural hazards hits £29m, the reinsurance is triggered to replenish DREF’s reserves to ensure that extra funds are available to provide aid to vulnerable communities, even during periods of increased demand.
IFRC’s ambition is to grow the fund every year to reach £89m in 2025.
Andrew Mitchell, minister of state for development and Africa, UK foreign, Commonwealth and development office, said: “Climate change is devastating the lives of millions around the world.
“With natural disasters on the rise, this innovative new insurance will provide extra funding for life-saving emergency assistance.”
Ogier’s Banking and Finance team in Guernsey provided counsel to the IFRC for the establishment of the Guernsey structure.
Paul Hodgson, his team and Tom Lees from Butterfield Guernsey also provided support around a trust structure.
Ogier’s team in Guernsey was led by partner Christopher Jones, with managing associate Matthew Macfarlane.
“This is the first time an indemnity-based reinsurance model has been developed within a humanitarian disaster risk finance context,” Jones said.
“We’re delighted to have advised our client alongside Reed Smith on this pioneering, innovative and ambitious project which will provide extra funding for life-saving emergency assistance.”