WTW gets USAID funding to develop climate-resilient insurance solution

Global advisory, broking, and solutions firm WTW has revealed it will receive funding from the U.S. Agency for International Development (USAID) to develop a climate-resilient insurance solution that aims to unlock climate adaptation investment from the private sector.

Utilising this new USAID funding, WTW said it will design a pilot facility enabling the U.S. Development Finance Corporation (DFC) to offer a parametric insurance solution (Resilience Wrapper) that protects its direct loans to private enterprises from climate-related shocks.

WTW said, “Following a triggering event, the subsequent loan repayment will be covered by the insurance payout.

“The Resilience Wrapper protects the borrowers’ debt servicing obligations from the most impactful climate risks, ensuring that they can remain operational and avoid default following a shock event.”

Simon Young, Senior Director, Disaster Risk Finance & Parametrics, WTW, commented, “Vulnerability to climate change and disaster risk can have a direct effect on the cost of borrowing, particularly in lower-income countries.

“This adds additional pressure on debt servicing capacity and increases the likelihood of debt default, which can lead to credit rating downgrades.

“With USAID funding, the WTW parametric solution will be a game changer for building the financial resilience of communities to extreme weather events by helping to unlock much-needed private sector investment in critical adaptation projects in climate vulnerable countries.”

Gillian Caldwell, USAID Chief Climate Officer, added, “A disaster can bankrupt a business overnight. Innovations like the WTW Resilience Wrapper make communities better equipped to withstand disaster by supporting the local companies they depend on, while incentivising lenders to work in places they might otherwise consider too risky for investment.

“I commend WTW’s leadership in this area as it signals both the need and the opportunity for greater private investment in resilience.”

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