Climate risk initiative of the year: Willis Towers Watson (WTW)
The climate risk initiative award goes to WTW for helping to develop innovative alternative risk transfer solutions.
This was seen in the company's creation of the first parametric insurance transaction, enabling the government of Belize's ground-breaking debt-for-nature swap.
WTW's sovereign debt "catastrophe wrapper" provided insurance protection to cover Belize's loan repayments after major hurricane events. The wrapper around the 20-year sovereign debt structure strengthens sustainability and resilience to climate shocks, which have previously triggered credit rating downgrades that have exacerbated economic hardship.
Partial solutions have been implemented for several Caribbean islands in the last five years, but they provide only a temporary break from debt repayments, rather than replacing a payment via an insurance pay-out. In this project the debt repayments were those to be made under the ground-breaking Blue Bond for Ocean Conservation debt restructuring, facilitated by the NatureVest team at The Nature Conservancy (TNC), and announced to great fanfare in Glasgow at Nature Day of CoP26.
The overall debt restructuring, facilitated in part by the catastrophe wrapper designed and placed by WTW, will unlock around $80m over 20 years to fund Belize's environmental conservation commitments. The funding will help to build the resilience of the Mesoamerican Reef, which protects much of Belize's coastline, and associated economic activity.
"Many coastal and island nations have three closely interlinked features: economic reliance on their valuable natural resources, higher exposure to the damaging effects of climate change, and unsustainable debt loads," said Kevin Bender, senior director of sustainable debt at The Nature Conservancy.
"In order to help solve the conservation funding needs of these nations, we also have to solve a complex web of financial risks. The catastrophe wrapper designed by WTW for the Belize transaction is a brand new solution that fills a much-needed gap."