Disasters force an estimated 26 million people into poverty every year. Climate change will further increase the magnitude and frequency of extreme events in the future. While regional catastrophe risk insurance pools in the Caribbean and the Pacific provided almost $60m of fast liquidity within days to speed response and recovery in 2017 alone, this is still only a small fraction of total losses.
The multilateral system is still weighed too heavily towards responding only after the disasters. On average, the humanitarian system provides $1.5bn in responding to disasters every year – an amount that regularly increases to over $4bn.
The development objective of the GRiF is to strengthen financial resilience of vulnerable countries by enabling earlier and more reliable response and recovery to climate and disaster shocks, and over time to a wider range of crises, through establishing or scaling up pre-arranged risk financing instruments, including market-based instruments like insurance. It will focus on helping poor and vulnerable people, and the economy, services and infrastructure they depend on, to recover more quickly when a disaster strikes.
Pre-arranged financing instruments not only allow for faster, more cost-effective response and recovery but can also drive greater disaster preparedness and resilience. Such instruments could absorb a larger fraction of disaster losses, helping to shift the balance from a reactive to a proactive approach to disaster financing and crisis management globally. GRiF aims also to create incentives for disaster prevention, preparedness, response and resilient reconstruction.
GRiF adopts a sequential approach, from climate and disaster risks toward wider range of crises. The scope of activities financed through the GRiF will begin with a strong focus on climate and disaster risk. However, given the high potential to apply risk financing instruments to wider crises, over time, projects and instruments financed through the GRiF will also respond to crises. Pilot engagements in contexts of wider crises will be identified within the first year of operations of GRiF.
The important role of risk financing and insurance is now globally recognized, including in the G7, G20 and V20 dialogues, and has led to the launch of the InsuResilience Global Partnership in November 2017. The GRiF will be supported by and build on the work of existing programs, including the InsuResilience Climate Risk Financing and Insurance Program MDTF jointly established by BMZ, DFID and the World Bank, the Centre for Global Disaster Protection jointly established by DFID and the World Bank, and InsuResilience Solutions Fund jointly established by BMZ and KFW. These programs currently form the Program Alliance of the InsuResilience Global Partnership.
The GRiF will be aligned with the vision and principles of the InsuResilience Global Partnership and will also form part of its Program Alliance, but it is not limited only to the results/objectives of the Partnership. The Facility is expected to be equally aligned with and support future policy priorities of participating countries. The GRiF can also be a vehicle to invest in risk financing and insurance instruments for earlier action in humanitarian emergencies.