While GP’s efforts to close the disaster protection gap have largely focused where the need is most profound in low- and middle-income economies, vast opportunities also exist to bring some of our lessons learned to vulnerable communities in higher income countries. This is precisely our motivation for supporting the Wharton Risk Center and the New York City Mayor’s Office of Climate Resilience alongside Guy Carpenter in the project: Promoting the Post-Flood Financial Resiliency of Low and Moderate Income Households.
The project recently received Civic Innovation Challenge award from National Science Foundation (NSF)/ U.S. Department of Homeland Security. The objective is to increase the financial resilience of low and moderate-income households in New York City to escalating flood risk through the use of inclusive insurance and innovative parametric solutions.
GP has been a pioneer integrating parametric solutions into the financial sector in low- and middle-income countries. In our flagship transaction with VisionFund International, we designed a disaster risk financing programme that blends the use of contingent credit and parametric risk transfer. This solution aims to help VisionFund’s microfinance institutions (MFIs) stabilize their balance sheets and access emergency liquidity after a disaster in order to help their borrowers recover more quickly. When disasters hit, lenders typically pull back liquidity, which makes recovery more challenging for the communities they serve. In contrast, the VisionFund initiative promotes quick, countercyclical financing to MFIs and their borrowers to speed up recovery. Now in its fourth year of operations, this programme includes tailored solutions for four different perils and for MFIs in 28 countries across Africa, Asia, and Latin America.
More recently, GP launched the Climate Resilience Enhanced Debt (CRED) product alongside Enabling Qapital, which embeds emergency liquidity and balance sheet support into a traditional wholesale loan product for MFIs. The first CRED transaction provides flood and drought protection to Chamroeun’s portfolio of agriculture loans in Cambodia.
As part of this new effort in New York City, GP will be helping to explore ways to work with local Community Development Financial Institutions (CDFIs) to incorporate similar parametric solutions as those deployed alongside VisionFund and Enabling Qapital. CDFIs represent a key lifeline to low and moderate-income households and finding ways to help these institutions promote faster recovery within the communities they serve can go a long towards building resilience and closing the disaster protection gap.
Read more about the programme here: https://riskcenter.wharton.upenn.edu/civicinnovations/