We've developed an innovative insurance mechanism that uses commercial markets to make donor contributions to our Disaster Response Emergency Fund (DREF) go even further.
About DREF Insurance
Since 1979, DREF has released funding rapidly and efficiently to local Red Cross and Red Crescent Societies before and after disasters strike. But as the frequency and intensity of disasters increase, in large part due to climate change, more and more people need humanitarian assistance to cope.
To keep pace with increasing disasters, we want to grow DREF significantly to 100 million Swiss Francs per year by 2025. To do this, we need to look beyond traditional donors and funding mechanisms and work with private sector partners.
That's why we've developed DREF Insurance, in partnership with Aon and the Centre for Disaster Protection. DREF Insurance is an innovative finance mechanism that leverages the power of the private sector to make stretched government donor contributions go further.
Through the insurance mechanism, instead of providing money to fund disaster responses as a traditional grant, donors have the option to pay the insurance premium. This stretches the value of their contributions and transfers the risk to the private sector if DREF funding requests relating to natural hazards exceed available resources.
The approach uses reinsurance markets to lay off the risk of excessive natural hazards and ensure funds for response are available in a timely and reliable manner, even in periods of excessive or unanticipated demand.
While direct donor contributions to DREF will always remain necessary, DREF Insurance provides a contingency financing layer and ensures the IFRC network can be there for people affected by disasters quickly, efficiently, and reliably.
Watch: How it works
What's in it for stakeholders?
Maximizing donor impact and reach
Cost and operational efficiency
Funding certainty for National Societies
Improving the humanitarian sector
Why is DREF well-suited to use insurance?
From a risk insurance perspective, DREF operates across all humanitarian crisis types, in all regions and risk types, which means it has a very diversified risk profile.
DREF’s robust dataset of allocations and disbursements dating back to its creation in 1979, as well as its transparent governance structure, make it possible to design and price an indemnity insurance policy.
And DREF’s standard and consistent fund management creates predictability and confidence for the insurance market to build the insurance product for DREF.
Partners and donors
We have partnered with Aon and the Centre for Disaster Protection (CDP) to develop DREF Insurance. Aon brings expertise in risk understanding, modelling and transfer to the private sector, while the CDP fulfils an impartial technical advisory role.
The capacity for the reinsurance deal was offered by the three founding members of the London-based Lloyd’s Disaster Risk Facility- Hiscox, Chaucer and RenaissanceRe, as well as Fidelis MGU.
So far, we have received funding for premium financing and product development from the following donors:
- InsuResilience Solutions Fund (ISF)
- UK Foreign, Commonwealth and Development Office (FCDO)
- British Red Cross
- Danish Red Cross
- Private sector partners
We are also investing some of our own funds to secure the insurance premiums.
If you'd like to learn more about DREF Insurance, or are interested in partnering with us, please get in touch by emailing: