Willis Towers Watson, a global advisory, broking and solutions company, has developed the Global Ecosystem Resilience Facility (GERF), the first global insurance facility of its kind to provide innovative finance and risk management solutions to build the resilience of ecosystems and the communities they support. The GERF was launched by Willis Towers Watson CEO, John Haley, during the Economist World Ocean Summit in Mexico which took place 7-9 March 2018.
Marine ecosystems are at risk, and damage to natural capital such as coral, mangroves and fisheries reduces its ability to protect the coastal communities, their economies and assets in developed and emerging countries. As more intense storms, floods, droughts, sea level rises, temperature increases, pollution and ocean acidification increase the vulnerability of coastal communities and threaten both lives and livelihoods, it is critical that the resilience of the environment that supports them is strengthened, said Willis Towers Watson in a statement about the launch.
The broker said that it will draw upon expertise across the Willis Towers Watson organisation alongside other scientific partners and leading risk carriers. This will mean that the GERF can play a unique role in responding to these growing risks by delivering powerful analytics, incentivising environmental stewardship and providing innovative insurance protection to mobilise development finance.
Initial work of the GERF, says Willis Towers Watson, will focus on the protection of ecosystems such as coral reefs, mangroves and seagrasses in the Caribbean to support resilience of fishing communities at threat from hurricanes and coral decline.
Willis Towers Watson, working with Cefas and the University of York, are mapping marine ecosystems, assessing risk exposure, and developing risk and value models for coral reefs in Grenada and the wider Caribbean. The aim is for the GERF to then incentivise continued ecosystem stewardship and asset maintenance through risk finance. Insurance programmes will be structured to encourage risk understanding, assessment, and the coordination and pre-planning of swift post-event recovery. Robust disaster risk management and contingency planning can be incorporated to protect the vulnerable against events that are beyond their control. The GERF will facilitate risk pooling to help regions bridge the post-disaster funding gap and provide a targeted, structured response to coastal communities and infrastructure, ecosystems and fisheries in particular, said the company.
Speaking in Mexico, John Haley, CEO of Willis Towers Watson, said: “The Global Ecosystem Resilience Facility is such an important initiative in helping to support the resilience of coastal and island communities to climate pressures. Dependence on the blue economy makes them particularly vulnerable to the impacts of climate related threats and other risks, and the goal of this ground breaking initiative is to help provide greater stability, and ultimately greater prosperity, to these communities.”
Rowan Douglas, CEO of Willis Towers Watson’s Capital, Science & Policy Practice, added: “The GERF acknowledges that there are two key aspects driving changes in the risk environment: human activity and natural processes. The facility addresses both aspects; communities build resilience through sustainable practices under their control, and disaster risk finance protects against events outside of their control.
“The Global Ecosystem Resilience Facility allows for the financing of increased resilience at a large scale. This global approach is key to building a sustainable blue economy and protecting coastal communities from climate impacts. We are proud to lead the way in the development of innovative mechanisms to extend financial protection to ecosystems and to incentivise sustainable growth,” Douglas concluded.
Willis Towers Watson says that the financing element of the GERF will focus on risk transfer and project finance. The risk transfer element will look specifically at risk pooling, and the project finance element examines the suitability and feasibility of a variety of financial instruments including catastrophe bonds, resilience bonds, grants, and loans.
According to Willis Towers Watson the GERF will build local capacity for climate mitigation and adaptation while providing a facility to finance increased resilience at a global scale. For the first time, the organisation said, this global approach will be combined with the regional frameworks required for governments to support the management of the marine environment and sustainable development of the blue economy.
Speaking on behalf of ICMIF, Chief Executive, Shaun Tarbuck said: “The mutual and cooperative insurance sector represents around one third of the total global insurance market. A large number of ICMIF members have made serious and wholehearted commitments to playing their part in the climate change debate and in providing resilience solutions that are both practical and properly funded.
ICMIF is involved in a number of initiatives which seek to support the insurance industry’s response to climate risk. Firstly, ICMIF launched the 5-5-5 Mutual Microinsurance Strategy at the COP21 Climate Change meeting in 2015. The 5-5-5 Strategy aims to protect 25 million previously uninsured, low-income people from the effects of climate change and natural disasters in five countries over five years. The initiative is focusing on some of the world’s poorest regions and the countries chosen for the project are Sri Lanka, the Philippines, Columbia, India and Kenya.
ICMIF is also working closely with the Insurance Development Forum (IDF) which was launched in 2016. The IDF aims to incorporate insurance industry risk measurement know-how into existing governmental disaster risk reduction and resilience frameworks; and to build a more sustainable and resilient global insurance market in a world facing growing natural disaster and climate risk.
Today in the developing world, more than 90% of economic costs of natural disasters are uninsured; known as the Protection Gap, this will include many coastal communities such as those which the GERF is aiming to help.
Shaun Tarbuck is co-Chair, with Joan Lamm-Tennant, CEO of Blue Marble Microinsurance, of the IDF Microinsurance Working Group which focuses on the private sector’s response to the G7 InsuResilience challenge to provide up to an additional 100 million poor people with insurance cover against the risks of climate change and natural disasters by 2020.
Shaun Tarbuck concludes: “the insurance industry has a critical role in building natural disaster resilience and helping to support vulnerable communities which are faced with increasing climate threats. We need more initiatives like the GERF which will support people who are trapped in the protection gap and under threat from climate related dangers and other risks, the goal of mutual and cooperative insurance sector is to provide greater stability to these communities.”