Guernsey SPV at Heart of New Disaster Response Financing Mechanism
October 03, 2023
The International Federation of the Red Cross and Red Crescent (IFRC), in collaboration with Aon, Lloyd's Disaster Risk Facility, and the Center for Disaster Protection, has launched an innovative disaster response risk transfer mechanism using a Guernsey special purpose vehicle (SPV).
The transaction, completed through a Guernsey SPV managed by Aon Insurance Managers and using other Guernsey vehicles in its structure, is meant to ensure that swift and agile financial support is available following a disaster.
A statement said the new insurance tool is the first indemnity-based reinsurance model developed within a humanitarian disaster risk finance context. It provides the IFRC's Disaster Response Emergency Fund (DREF) with contingency funding of up to £18 million.
Through the new risk transfer mechanism, once DREF's allocated funding for natural hazards hits £29 million, the reinsurance is triggered to replenish DREF's reserves, acting as a safety net to ensure that extra funds are available to provide aid to vulnerable communities, even during periods of increased demand.
The IFRC hopes to increase the size of the fund every year to reach £89 million in 2025.
The banking and finance team at international legal and professional services firm Ogier advised the IFRC on the program's structure and the various contractual relationships needed to create the risk transfer mechanism. Butterfield Guernsey also provided support around a trust structure for the mechanism.
October 03, 2023
