10 Minutes with Ekhosuehi Iyahen and Heike Schmitz: How insurance can drive climate resilience and sustainable development
Ekhosuehi Iyahen, Secretary General of Race to Resilience partner, the Insurance Development Forum (IDF), and Heike Schmitz, Member of the IDF Operating Committee and Co-Chair of the IDF Infrastructure Task Force, discuss the pivotal role of the insurance industry in building climate resilience.
By Climate Champions | June 18, 2024
Key takeaways:
- Insurance plays a vital role in driving climate resilience and sustainability by providing financial protection and incentivizing proactive risk management.
- The industry’s investments in resilient infrastructure support communities and businesses in adapting to and recovering from climate impacts.
- Use of innovative financial structures and public-private partnerships reduces investment risks and enhances project creditworthiness.
- The insurance industry’s expertise in risk assessment and management is crucial for identifying and mitigating climate risks.
- Collaborations with governments, NGOs, and other stakeholders are essential for bridging the protection gap and fostering long-term resilience.
- Successful models in developing and emerging economies can be scaled and replicated globally to enhance disaster resilience.
Q1: How is the insurance industry positioning itself to address climate change?
Ekhosuehi Iyahen: The insurance industry is increasingly integrating climate resilience into its investment strategies and underwriting decisions. By leveraging its expertise in risk analysis and management, the industry provides financial protection against climate-related disasters and promotes proactive measures like stronger infrastructure and adaptation strategies. Insurers are also mobilizing capital towards sustainable and resilient infrastructure projects, particularly in vulnerable and emerging economies.
Ekhosuehi Iyahen. Image: IDF
Q2: What is the Insurance Development Forum’s Blueprint for resilient infrastructure?
Heike Schmitz: The IDF’s Blueprint to Facilitate Investments in Resilient Infrastructure in Developing/Emerging Markets channels insurance sector investments into projects that strengthen the ability of vulnerable communities to withstand and recover from climate-related and other disasters. This initiative focuses on sectors such as renewable energy, water management, and social infrastructure, aiming to provide financial returns while delivering significant social and environmental benefits.
Q3: What are the key features of the Blueprint?
Iyahen: The blueprint targets small to mid-size commercial infrastructure projects in developing and emerging markets, covering sectors like renewable energy, water, waste, transportation, social infrastructure, digital infrastructure, and nature-based solutions. Investments are made through senior and mezzanine secured debt, meeting the credit profile requirements of the global insurance industry. Partnerships with DFIs and credit enhancement providers create new investment structures that align with insurer requirements.
Q4: How do innovative financial structures and public-private partnerships enhance the IDF’s efforts?
Schmitz: These mechanisms reduce investment risks and enhance project creditworthiness, enabling the mobilisation of large-scale private capital. Partnerships with development finance institutions and other entities provide necessary credit enhancements and risk mitigation tools, making investments in resilient infrastructure more attractive to insurers. These collaborations also bring diverse expertise and resources, fostering innovative solutions for building resilience in disaster-prone areas.
Heike Schmitz. Image: IDF
Q5: Can you give specific examples of projects supported by the IDF Blueprint?
Iyahen: Examples include smaller to mid-size commercial infrastructure projects in sectors such as renewable energy, water, waste, transportation, social infrastructure (e.g., hospitals, education, government-backed housing), digital infrastructure, telecommunication, and nature-based solutions. These projects enhance the resilience of vulnerable communities by providing essential services and infrastructure that can withstand climate impacts.
Q6: How does the IDF assess the effectiveness of these investments?
Schmitz: The IDF, in collaboration with insurance participants and BlackRock, is developing KPIs to measure the positive outcomes of projects on vulnerable communities. These metrics align with frameworks assessing infrastructure contributions to resilience.
Q7: What are the main challenges in aligning insurance investments with disaster-prone areas?
Iyahen: The main challenges include perceived investment risk and difficulty finding investment-grade projects. The blueprint addresses these challenges by using innovative financial structures and credit enhancement techniques to improve the credit quality of projects, making them more attractive to insurance investors. It also emphasizes the need for commercially viable projects that deliver both financial returns and resilience benefits.
Q8: What is BlackRock’s role in implementing the Blueprint?
Schmitz: BlackRock leverages its infrastructure expertise and understanding of insurance industry investment requirements to implement the blueprint, ensuring positive outcomes for individuals, communities, and businesses in vulnerable countries.
Q9: Is the Blueprint scalable and replicable?
Iyahen: Yes, the blueprint aims to offer a scalable solution for resilient infrastructure projects, encouraging greater insurance sector investments in developing and emerging economies. Successful outcomes can inspire similar efforts worldwide, highlighting the critical role of insurance in driving global disaster resilience.
Q10: What should the global community understand about the role of insurance in climate resilience?
Schmitz: The global community should recognize the insurance industry’s vital role in driving climate resilience and sustainability. Through strategic investments, innovative financial solutions, and risk modelling insights, the insurance industry helps communities and businesses adapt to and recover from climate impacts. Collaboration with governments, NGOs, and other stakeholders is crucial for bridging the protection gap and fostering a resilient and sustainable future for all.
Find out more about the Insurance Development Forum and its Blueprint for resilience infrastructure
