About half of the economic losses due to natural disasters in Colombia are caused by floods, followed by earthquakes and landslides. However, adequate insurance products protecting Colombia´s urban population against the disastrous effects of these hazards do not exist.
The international humanitarian assistance and sustainable development organization Global Communities and the Insurance Development Forum (IDF), represented by its members Hannover Re, an international reinsurance company, and Willis Towers Watson, a global advisory, broking, and solutions company, formed a public-private partnership to promote resilience in communities susceptible to natural catastrophes by developing natural disaster risk insurance products for the City of Medellín. The InsuResilience Solutions Fund (ISF), managed by Frankfurt School and funded by KfW Development Bank is providing co-funding for the product development of the insurance solution.
This public-private partnership and the Medellín project are part of implementing the Tripartite Agreement between the German Federal Ministry for Economic Cooperation and Development (BMZ), the IDF, and the United Nations Development Programme (UNDP) to support risk management solutions for climate-vulnerable countries. The ISF is one of the vehicles used to support the implementation of the joint agreement.
With the objective to increase its resilience the project will develop a parametric flood and earthquake product, as well as an indemnity landslide protection for Medellín as part of the city’s Disaster Risk Management Plans. It foresees that once the product is taken to market after the end of the project, the city government of Medellín will be the policyholder via its Fund for Disaster Risk and Emergencies Management providing funding for emergencies, rehabilitation, and reconstruction in Medellín. In case of an insurance event, the payouts of the insurance will benefit local affected communities in accordance with the municipality’s emergency response plans, for example via food and cash disbursements, and fast repair of basic infrastructure.
The project thus increases the resilience of Medellín to climate risks and natural disasters through insurance protection. Serving as a role model for other cities of the country, the project also fosters a favorable environment for the development of similar climate risk insurance products in the Colombian market.