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In a perhaps surprising turn of events, the opening hours of the COP28 climate talks today have seen a landmark agreement to operationalise and provide initial funding for the much-discussed loss and damage fund, that is designed to help the countries that are most vulnerable to the adverse effects of climate change.

The fund had been agreed on back at COP27 and much-discussed ever since, with agreements as to who should fund it, how that funding should be used, what kind of financing products should disburse funding and how should funding be triggered, all still seeming to be up in the air, to a degree at least as COP28 began.

Which is why we say ‘perhaps surprising’, as most had expected discussion and negotiation over the loss and damage fund to run on for at least a few days, if not the majority of the COP28 event.

There have always been discussions about whether some of the funding could be used to pay risk transfer premiums, to help the countries most vulnerable to the effects of climate change lock-in long-term insurance-like risk financing.

Agreements as to how the loss and damage fund will be put to work remain missing or unclear so far, but the agreement to operationalise it today and the initial funding announced is a good step towards this actually becoming reality, despite all the disagreement that has gone before.

The UAE, the host of this years COP28 climate talks, said today that it will commit $100 million to the loss and damage Fund, a move it hops will pave the way for other nations to make pledges.

COP28 President Dr. Sultan Al Jaber said, “What was promised in Sharm El Sheikh, has already be delivered in Dubai. The speed at which the world came together, to get this Fund operationalized within one year since Parties agreed to it in Sharm El Sheikh is unprecedented.”

“This Fund will support billions of people, lives and livelihoods that are particularly vulnerable to the effects of climate change,” added Dr Sultan, “I want to thank my team for all their hard work to make this possible on day one of COP28. It proves, the world can unite, can act, and can deliver.”

Other significant commitments to the loss and damage fund included Germany, which committed $100 million, the UK, which committed £40 million for the Fund and £20 million for other arrangements, Japan, which contributed $10 million and the U.S., which committed $17.5 million.

The agreement and initial funding for the loss and damage fund was welcomed by the most vulnerable nations, but there is a clear recognition that the details will matter, as well as the follow-on funding, with over $400 billion a year estimated by some studies to be the cost of loss and damage each year.

Other countries are going to be expected to commit, while there will also be efforts to see how private capital can be crowded in to support the loss and damage financing needs of the world’s climate vulnerable nations.

The insurance, reinsurance and insurance-linked securities (ILS) industry do have a role here, albeit likely further down the line, once agreement has been reached on financing tools, structures and how to disburse capital, are made.

Risk transfer and insurance products remain at the heart of discussions and it’s clear that, as private capital gets considered as an elastic source of funding, the catastrophe bond and insurance-linked securities (ILS) could be up for discussion as potential options.

So too should responsive risk transfer options, using parametric and index triggers that could provide rapid payouts for use in disaster relief after climate-related events.

It’s a positive start to COP28, with agreement on an issue that has been discussed now for years.

Although, in reality, the perhaps lengthy discussions can now begin on the details that really matter.

Including, implementation, how funding will be gathered, used, and disbursed, as well as whether any of it can fund premiums to pay for upfront, longer-term risk transfer instruments, to support the most climate-vulnerable nations and their populations.

Also read: Risk-sharing systems must be a pillar of Loss and Damage architecture: Report.

Loss and damage fund agreed at first day of COP28 was published by: www.Artemis.bm
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Tenax Capital, the London based hedge fund investment manager that operates a catastrophe bond strategy, has joined the insurance-linked securities (ILS) industry working-group that focuses on enhancing environmental, social and governance (ESG) transparency in the ILS market.

Tenax Capital joined the ILS ESG Transparency Initiative and noted its commitment to incorporating ESG considerations into its investment processes.

As we reported recently, the formation of the ILS ESG Transparency Initiative came about as what was a Swiss-based working group of ILS managers focused on ESG transparency welcomed its first international members.

The Switzerland-based insurance-linked securities (ILS) investment fund managers created the working group to develop a data transparency proposal to advance environmental, social and governance (ESG) in the ILS market, with the initiative informally known as the Zurich ILS Working Group.

The founding members were, Credit Suisse Insurance-Linked Strategies; LGT ILS Partners; Plenum Investments; Schroders Capital ILS; Solidum Partners; and Twelve Capital.

The expansion and renaming to the ILS ESG Transparency Initiative saw the following new members joining: AXA Investment Managers; Leadenhall Capital Partners; SCOR Investment Partners; Securis Investment Partners; and Tangency Capital.

Now, Tenax Capital can also be added to that list.

Tenax Capital noted that the ILS ESG Transparency Initiative currently counts some of the largest and most respected ILS managers as members.

“The primary scope of the initiative is to improve and standardise the ESG disclosure and data related to ILS transactions, in an effort to enhance transparency with respect to covered risks and ultimate beneficiaries of coverage,” Tenax Capital said.

Adding that, “At Tenax we are committed to make ESG considerations a key driver of our investment management process, and we actively work to raise awareness of ESG within our investor community and the broader markets.”

ESG investing and the opportunities it presents remain an area of focus for the insurance-linked securities (ILS) market. Read more of our insights on this topic here.

Tenax Capital joins ILS ESG Transparency Initiative working group was published by: www.Artemis.bm
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Parameter Climate, the parametric climate risk transfer focused underwriter and advisor, has completed a management buyout of seed investor SiriusPoint, as the latter continues to reduce its equity ownership in program and MGA businesses.

Parameter Climate was founded by long-standing weather risk transfer industry executive Marty Malinow and staffed by a very experienced senior team that had worked together over numerous years.

The company launched to provide specialist advisory, structured financial products, distribution, and underwriting services to the growing market for climate risk transfer, with parametric risk transfer at its heart.

Parameter Climate then secured a relationship and seed investment with specialty insurance and reinsurance player SiriusPoint roughly two years ago.

Now, the Parameter Climate management have bought SiriusPoint’s stake in the company, while SiriusPoint is set to continue supporting the firm through the provision of underwriting capacity.

“We thank SiriusPoint for its significant contributions to our launch two years ago and look forward to continuing to provide underwriting advisory to SiriusPoint and others,” Martin Malinow, Founder and CEO of Parameter Climate explained.

Scott Egan, CEO, SiriusPoint added “SiriusPoint is pleased to have contributed to the creation of Parameter Climate, which addresses an important protection gap in the climate and weather risk management market. While this transaction is consistent with our strategy to reduce our equity investments in programs and MGAs, we look forward to continuing to support Parameter Climate with underwriting capacity based on its strong underwriting results to date.”

Since its launch, Parameter Climate has also developed its own risk analytics platform, focused on climate exposures, with the ClimateDelta product now available for licensing as well.

In addition, the company is also adding advisory and brokerage services for both vertical-based protection buyers and capacity providers to its specialised climate risk transfer focused offering.

Malinow went on to say, “Our dialogues with both existing and new clients in a variety of industries illustrate a significant and growing need for climate and weather risk management, yet there remains a gap in advisory, intermediation and analytics. We created ClimateDelta to streamline the process of risk assessment, structuring and transaction management for both buyers and sellers, and look forward to using our 20+ years of market expertise to turn this need into transactions.

“With increased climate and weather volatility, risk transfer is becoming a strategic imperative for protection buyers in a number of industries and an important opportunity for a growing group of capacity providers,” Malinow added. “Parameter Climate will make this risk insurable and investable by combining the market’s most experienced advisory team with cutting-edge analytics.”

Parameter Climate team buyout SiriusPoint stake, expand offering was published by: www.Artemis.bm
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