Climate risk management solution of the Year: WTW

WTW receives the accolade of climate risk management solution of the year for using risk analytics to underpin a bespoke parametric structure for Belize and demonstrate how insurance techniques can support ESG objectives.

The central American country of Belize is vulnerable to hurricanes, storms and associated flooding and wind damage. The World Bank's climate change knowledge portal says the country's low-lying terrain exacerbates the effects of flooding and sea level rise.

"Belize is in the top 5% for losses due to climate-related natural disasters and in the top 12% for climate-related disaster fatalities over 1997 to 2016," says Dr Simon Young, senior director in WTW's Climate and Resilience Hub.

Given this situation, WTW was invited to develop a bespoke parametric insurance solution for Belize, transferring the default risk to sovereign debt payments after major climate disasters.

Young says 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 the environmental and conservation commitments of the government of Belize.

He explains: "The occurrence of a triggering event generates an automatic and fully objective waiver of the next semi-annual debt servicing payment due to be made by the government of Belize, with the pay-out from the insurance policy being used instead to service the creditors.

"In this way, the loan terms and duration remain fully intact, while the government is free to focus resources on disaster response and economic recovery for at least six months."

InsuranceERM's judges were full of praise for the WTW climate risk initiative. One said it was a "novel solution opening opportunities for risk transfer mechanisms to help manage environmental risks".

Another judge liked the solution's concrete and tangible benefits, as well as its potential to be applied to other coastal and island nations.

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Driving innovation in climate risk management

Driving innovation in climate risk management

WTW's global ICT climate lead Adhiraj Maitra and Dr Simon Young, senior director in WTW's Climate and Resilience Hub, describe the company's recent achievements in climate risk management, and challenges in the transition to net zero