Lloyd’s of London offers affordable insurance to island nations

The Lloyd’s of London insurance market has unveiled a new venture to provide affordable insurance cover for small islands in the Pacific that face mounting risks from natural disasters as a result of climate change.
Lloyd’s has partnered with broker Aon and the United Nations Capital Development Fund (UNCDF) to set up what it called the “first of its kind disaster resilience vehicle”, which is being presented to King Charles on Thursday during his visit to Samoa for his first Commonwealth heads of government meeting. Four years ago, the King launched the Sustainable Markets Initiative, which includes an insurance task force that is chaired by John Neal, the Lloyd’s chief executive. The islands venture is born from this initiative.
There are fears that global warming presents a major threat to the low-lying Pacific islands, not just because of flooding caused by rising sea levels but because climate change is making extreme weather events, such as devastating tropical storms, more common.
The aim of the Lloyd’s vehicle is to increase insurance cover for small island developing states that face these risks and where insurance is expensive or hard to access as a result.
It will provide a basic insurance product that will make payouts directly to households and businesses that are hit by a disaster. The UNCDF, a body that helps developing countries, is providing a loan facility for premium financing to ensure the cover is affordable.
It will initially focus on Fiji, Papua New Guinea and Samoa but the idea is to eventually replicate the model elsewhere, including in the Caribbean and Africa.
Neal said the plan bolstered the role played by Lloyd’s and the insurance and reinsurance industries “in supporting communities within the Pacific Islands to respond and recover quicker from disaster”.
Dominic Christian, the chairman of Aon’s reinsurance solutions business, said: “Providing access to risk capital to reinforce and augment the work of the UNCDF is an important step in helping the Pacific islands build resilience against natural disasters, and becomes even more important given the potential impacts of climate change.”
Lloyd’s is the world’s biggest and oldest insurance market that provides cover for everything from natural disasters and terrorism, to shipping and satellite launches. It has famously insured things as exotic as the legs of dancer Michael Flatley and the voice of rocker Bruce Springsteen and can trace its roots to the 17th century.