The International Federation of Red Cross and Red Crescent Societies (IFRC), in collaboration with global professional services firm Aon, Lloyd’s Disaster Risk Facility and the Centre for Disaster Protection, has announced a pioneering approach to disaster response that will ensure swift and agile support is available when a disaster occurs.
The transaction has been completed through a Guernsey SPV which is managed by Aon Insurance Managers, and uses other Guernsey vehicles in its structure.   Aon Guernsey MD Paul Sykes hailed the achievement as “Guernsey insurance industry’s finest hour yet, because it will allow the Red Cross, potentially, to reach an additional 6 million vulnerable people each year.  It is another watershed moment for the industry, demonstrating that it can address the protection gap and rising humanitarian needs.”
The new insurance tool, which is the first indemnity-based reinsurance model that has been developed within a Humanitarian Disaster Risk Finance context, provides the IFRC’s Disaster Response Emergency Fund (DREF) with contingency funding of up to £18 million.
Essentially, once DREF’s allocated funding for natural hazards hits £29 million, the reinsurance is triggered to replenish DREF’s reserves, acting as a safety net to ensure that extra funds are available to provide aid to vulnerable communities, even during periods of increased demand.
Andrew Mitchell, Minister of State for Development and Africa, UK Foreign, Commonwealth and Development Office said: “Climate change is devastating the lives of millions around the world. With natural disasters on the rise, this innovative new insurance will provide extra funding for life-saving emergency assistance.”
Ogier’s Banking and Finance team in Guernsey provided counsel to the IFRC in connection with the establishment of the Guernsey structure and the various contractual relationships put in place to facilitate the creation of this novel risk transfer mechanism. 
Paul Hodgson, his team and Tom Lees from Butterfield Guernsey also provided support around a trust structure. 
Ogier’s team in Guernsey was led by partner Christopher Jones, with managing associate Matthew Macfarlane. Christopher said: 
“This is the first time an indemnity-based reinsurance model has been developed within a humanitarian disaster risk finance context. We’re delighted to have advised our client alongside Reed Smith on this pioneering, innovative and ambitious project which will provide extra funding for life-saving emergency assistance.”
IFRC’s ambition is to grow the fund every year to reach £89 million in 2025. Currently, there is an alarming increase in small and medium-scale emergencies, which means funding may not always be available when needed. 

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