Specialised companies for development aid and catastrophe protection

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Specialised companies for development aid and catastrophe protection

Munich Re supports sustainability projects and organisations (e.g. in the development aid sector) via specialised spin-off companies. These focus on specific financing and risk management solutions.

Development projects and organisations offering private development aid and catastrophe protection often lack adequate financing and insurance solutions. In response to this, Munich Re has spun off specialised units which work independently and autonomously while still benefiting from the Group’s know-how and network.

sfr-consulting: A specialised service provider for project funding in emerging and developing countries

It is estimated that emerging and developing countries will require some three to four and a half billion US dollars a year to meet the sustainable development goals (SDG). Even though states are also relying on the private sector here, financing SDG projects is often difficult. The hurdles include weak regulatory framework conditions, or a lack of sustainable or favourable financing options. Banks often refuse to make loans for such projects owing to the associated risks, and non-profit institutions cannot finance them alone.

Working together with development finance institutions and financial supporters, the Munich Re subsidiary sfr-consulting (Sustainable Finance Risk Consulting) develops risk-transfer solutions, mobilising private investment in SDG projects. Municipal development projects realised with the aid of private investors are one such example. “The surplus of investable private capital and the limited number of bankable SDG projects increase the risk of cut-throat competition between private and state capital”, explains Managing Director Thomas Mahl. sfr-consulting has thus created a structure allowing development banks to enter the insurance ecosystem and improve the climate for investment through the assumption of risks. “We lay the groundwork for this as an intermediary and agent for development banks and insurers”, says Thomas Mahl. sfr-consulting was founded in 2017 and is registered as an independent consultancy and broker.

Supporting sustainable power generation in Sub-Saharan Africa

As part of the UN initiative Sustainable Energy for All (SE4ALL), Munich Re partnered with the European Investment Bank and two primary insurers to develop the risk-transfer solution African Energy Guarantee Facility (AEGF) and foster sustainable electricity generation in the sub-Saharan region. This provides protection against political risks to mobilise and expand private investment. As a sustainable (re-)insurance pool, AEGF is structured with risk-transfer tranches, which can be assumed by insurers and private financial institutions, for example.

SIP: Companies offering security for development aid and catastrophe protection

Natural catastrophes, infrastructure deficiencies, obstacles in political or public-tender processes: development aid and catastrophe protection organisations face many risks which can lead to relief supplies or material assets being lost or damaged, or even – in the worst case – to injured persons.

Social Impact Partners (SIP), a joint venture between Munich Re and Hollard Insurance Group, offers solutions for the aforementioned organisations and for NGOs in this area. Examples of these solutions include covering aid shipment risks, offering donors greater transparency on how their money is spent, making funds available, and using them to ensure that aid reaches communities. SIP was also founded in 2017 and has offices in Munich and Johannesburg.

Fighting AIDS, TB and Malaria more effectively

In 2014, Munich Re had already entered into a cooperation with the Global Fund, one of the key financing tools in the worldwide battle against AIDS, tuberculosis and malaria. SIP holds the operational responsibility for this partnership. Via holistic risk assessments and concrete recommendations for action derived from these, SIP supports the Global Fund in averting risks and protecting against property and reputation risks.

“In 2015, Ghana’s Central Medical Stores, which the Global Fund also used, were practically razed in a fire. Because it had no insurance for this, the Global Fund suffered a proverbial total loss”, said SIP founder Manuel Holzhauer. “Insurance cover is now in place and the fund can expect their medicines to be replaced quickly in case another such disaster would strike.”

The common denominator

With sfr-consulting and Social Impact Partners, Munich Re is expanding its activities to include sustainable risk management and financing. This helps secure SDG projects in developing countries. And private development aid and catastrophe protection organisations benefit from more robust value chains, making sure aid gets through.

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