The World Bank is working with the UK Government to set up the London Centre for Global Disaster Protection (LCGDP).
Speaking at the International Insurance Society’s global insurance forum, Lord Bates, minister of state for international development, said the new operation would foster insurance solutions and risk management for developing countries.
The centre has been established in partnership with the World Bank and Germany in a bid to grow the role of insurance in mitigating damage caused by natural catastrophes in less economically developed economies (LEDCs) and encourage countries to better manage risk.
The centre will provide training, risk analysis and financial analytics to developing countries and bring together experts from finance, science and humanitarian communities.
Highlighting the desire of the UK Department for International Development to work more closely with the insurance industry, Lord Bates said the British government was focused on developing the new centre as an area of expertise to help countries better mitigate risk.
“We have a shared ambition – to develop the resilience of the poor to natural disaster,” he said.
“What really frustrates me – frustrates us all – is that these risks can be mitigated. Managing disaster risk in a more effective way is a central part of our push for humanitarian reform.
“In an emergency, time costs lives. Early action saves lives, and more than half of the cost of the response can be saved by responding quickly,” he added.
Joaquim Levy, managing director and chief financial officer at the World Bank Group said: “This is a really strong partnership that will help developing countries better manage risk.
“The centre is a stepping stone that will reduce the vulnerability of these countries to economic losses. The benefits of giving a hand for disaster planning like this cannot be understated.
“We are going to have our people embedded in the project. In Washington we are also developing some activities with support from Germany.
Our main role is as a neutral broker, development capacity and supporting new modelling,” he added.
Levy said that a key focus of the centre would be on developing the role of parametric insurance triggers to natural disasters.
At the IIS meeting, the German government also announced an additional €15m of funding to support the development of insurance solutions to tackle climate change risks.
Ingrid-Gabriela Hoven, director general of the Department for Global Issues at Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), said: “This allows us to bring in more innovations from the private sector and will launch early next year.
“We are trying to use the euro and the pound to leverage money to derisk. In order to this we can help to achieve the goals of the Agenda 2030 and to use our humanitarian system in a cleverer way.”
Research by risk modelling firm RMS, commissioned by UK Department for International Development (DfID), suggests that immediate disaster response – instead of waiting for aid – can reduce emergency response expenditures by up to 64%.
The RMS study tracks annual average asset loss from natural disasters across 77 countries.
Average asset loss hit $29.1bn, while annual average humanitarian aid expenditure on natural disasters was $2.2bn, highlighting the significant protection gap in developing countries that could be filled by the global re/insurance industry.