The London Market Group (LMG) has launched a white paper to discuss the creation of a foreign aid catastrophe bond.
The paper, released at a roundtable in the House of Commons, would use the soon to be created UK ILS regime to address the risk of natural catastrophes in under-insured emerging markets.
The bond would provide a more cost effective approach to catastrophe relief backed by commercial capital.
Malcolm Newman, CEO of reinsurance company SCOR’s London and Paris hub and leader of the LMG workstream, said: “The idea behind the foreign aid catastrophe bond is a joint initiative between the government and LMG to provide a cost effective response to catastrophes currently supported by the UK foreign aid budget.”
“We are looking to emulate other government-led forms of insurance which already exist in areas such as Mexico and the Caribbean to cover damage from the major natural perils of windstorm and earthquake.”
“There are some clear benefits from this proposal, for example the government could provide a more predictable and transparent source of funding for short term disaster relief and potential longer term resilience against climate change.”
