EC backs weather and cat insurance programme
London, 27 November: The European Commission has pledged €24.5 million ($31.6 million) to the Global Index Insurance Facility (GIIF), which aims to develop index insurance products that mitigate weather and catastrophe risks in African, Caribbean and Pacific (ACP) countries.

This is the first donation made to the GIIF, which will offer insurance that guarantees beneficiaries, such as smallholders, rapid payments following natural disasters once a pre-determined index has been triggered. These indexes could cover centimetres of rainfall, temperature cariations, wind-speed or seismic activity, explained the Commission.

Louis Michel, EU commissioner for development and humanitarian aid, said: "In times of climate change, when developing countries are ever more exposed to weather-related threats, the GIIF will help the population in ACP countries to reduce their vulnerability to external shocks and natural disasters and thereby support their livelihoods.”

The Commission said that “traditional insurance solutions have met with little success in developing countries to cover risks from natural disasters.”

Unlike conventional insurance, payments against index insurance contracts are not based on direct damage assessment, but on variations from pre-defined indexes. This approach tends to lower transaction costs and speed up pay-outs.

The money given by the Commission will go to a trust fund that will help with capacity-building efforts, said a spokesman Michel.

These will include promotion and public awareness about index insurance and the strengthening of legal, regulatory and supervisory systems related to index insurance in ACP countries. The GIIF will also work to improve data availability, data cleaning, catastrophe risk modelling, including using satellite data, and product development and development of commercial capacity.

There is no financial ceiling to the trust that will fund the GIIF, though the Commission is not expected to make further donations. However, “one cannot rule this out”, said Michel’s spokesman, as future EU programmes aimed at reducing disaster risk in the ACP region state that possible activities will include "further facilitation of access for ACP countries to insurance coverage for parts of the risks related to natural disasters”.

The GIIF will be implemented by the International Finance Corporation, a member of the World Bank Group, over a period of 60 months.