How DFID plans to use insurance to build resilience in small island states

LONDON — Securing better access to insurance will be at the heart of the United Kingdom’s efforts to help small island states prepare for and respond to natural disasters in 2018, a government minister has said.

Speaking on the sidelines of the Commonwealth Heads of Government Meeting in London this week, Minister for International Development Lord Michael Bates offered a look into Department for International Development’s plans to leverage insurance tools in the wake of a series of hurricanes that devastated small island states last year.

He spoke ahead of an announcement by Secretary of State for International Development Penny Mordaunt that the U.K. would provide an additional 19 million British pounds ($26.7 million) to the Caribbean for disaster preparedness and risk resilience following Hurricanes Maria and Irma, and an additional 1.3 million pounds to the Pacific island nation of Tonga following Hurricane Gita.

Bates said disaster preparedness and financial resilience will be the highest priority in 2018 for the Centre for Global Disaster Protection, launched last year by DFID and the City of London.

Of the center’s focus, Bates told Devex: “It’s trying to get private sector insurance companies to be involved. When the hurricanes hit the Caribbean, the first money that actually came in was not from any bilateral aid resources; it was actually from the insurance, because they pay out on an event.”

“Insurance is something which is part of a good strong resilience system in the U.K., so why not share that expertise and see if it can be introduced to alleviate some of the problems faced by developing countries as well? That’s what we’re trying to explore.”

Bates explained that the center is bringing developing countries together with partners including the U.K. government, the World Bank, civil society, and the private sector with the goal of enhancing resilience using financial tools such as insurance.

It ran its first “innovation lab” in January in partnership with insurance market Lloyd’s of London, bringing together more than 50 people from across the finance, humanitarian, engineering, and development sectors. A report on the outcomes of the lab was published this week.

Speaking about the impact of Hurricane Maria, Bates explained: “Dominica had over 200 percent of annual GDP wiped out overnight. No small island can reasonably be expected to recover and rebuild after a catastrophic disaster which undermines their entire economy without international support.”

Six months after the disaster, he said the U.K. is still providing assistance to hurricane-hit islands, particularly to vulnerable populations and efforts to “build back better,” including more than $100 million in infrastructure programs, mostly in the Caribbean.

At a CHOGM side event at Chatham House on Monday, Bates also said the U.K. is working to tackle corruption, particularly in a way that avoids negatively impacting remittances, which account for three times the amount of aid going to small island developing nations, according to United Nations figures.

“We all know that corruption is a serious problem and a challenge that we need to address, so then you put in place significant controls about anti-money laundering, and anticorruption legislation, you put them on the statute book and what happens? The financial institutions that were delivering remittances then start de-risking, and the cost of actually sending funds back to countries starts to get more and more expensive,” he said at “The Big Picture on Small Island States” event.

The answer is not to “roll back on anti-money laundering and anticorruption legislation,” but to “work with small island states, work with other members of the Commonwealth, to actually help them to get ready for that challenge,” he said.