IDF & UN OCHA partnership on Forecast based Financing

Project Objective, Goals, and Innovation

The Overall Project Objective is to demonstrate an anticipatory disaster risk transfer product, to serve as proof of concept that insurance can be used to mitigate the potential losses of forecasted climate shocks by triggering pay-outs and related mitigation actions ex ante the risk event, therefore allowing for more effective humanitarian interventions and budget allocation.

The Specific Project Objective is to develop and implement a pre-shock climate index-based insurance product where the pay-out is before a shock or where the policy-holder is given choice over the timing of the pay-out [either as an addendum to an existing insurance policy or a stand-alone policy].

The Goals of the project are:

• To facilitate real-time learning and evaluation that can maximize the impact and potential replicability of the project.
• To leverage the proof of concept for replication and scale, opening up the anticipatory-action insurance market.
• To set the basis for replication to other risks (e.g. epidemics and pandemics).

Why is this project different and relevant for IDF?

This project brings the insurance and humanitarian sectors together in collaboration for the design and implementation of sustainable anticipatory or forecast-based financing for the deployment of carefully designed action plans to mitigate climate risk impacting vulnerable populations, and setting a platform for replication and scale.

The project will build on the learnings of the few, existing anticipatory and forecast-based humanitarian and insurance programs, and bring the insurance sector’s joint expertise via the IDF to further improve the forecast-based or anticipatory component.

The collaboration between the IDF and OCHA positions both counterparties to access top knowledge and expertise from the insurance and humanitarian sectors respectively, setting the basis for a successful, impactful project.

Partnership

Willis Towers Watson (WTW) is the member assigned by IDF to lead on this project. Other IDF members involved in the project or who have participated in research and working virtual sessions to date are London Centre for Disaster Protection, AXA, Allianz, Cerulean Consulting, WFP, Tetratech, Hamilton, Scor, Munich Re, Renaissance Re, and Swiss Re.

OCHA provides strategic advice through the Humanitarian Financing Strategy and Analysis Unit leading the anticipatory action workstream, and data and analytics support through the OCHA Centre for Humanitarian Data.