Humanity Insured project pipeline ‘stuffed to bursting’ for 2025

By Rebecca Delaney

March 12 - Humanity Insured has a “bursting” pipeline of projects for its first full year of operation, senior advisor Caroline Birch told Sustainable Insurer after the industry-backed non-profit approved four parametric insurance projects for drought and extreme heat.

Humanity Insured was launched in the second half of last year with Allianz, Hiscox, Fidelis Partnership, Tokio Marine Kiln and Beazley as seed funding carrier partners, having been incubated by Howden. The organisation aims to secure 2 billion pounds ($2.59 billion) in insurance capacity for 30 million people globally by 2030.

The latest figures from the Centre for Disaster Protection in January found that less than 2% of the $76 billion spent on crisis finance in 2022 was pre-arranged.

Of this, just 1.4% reached low-income countries, meaning that less than $1 of every $5,000 of crisis finance is channelled to low-income countries in the form of pre-arranged finance.

“The overarching mission of Humanity Insured is to reduce the impact of climate change as a driver of poverty through insurance protection to build financial resilience,” Birch said.

“The momentum is really picking up. We did seven projects last year, which already was pretty good because the soft launch was mid-late last year. This year we've already had four more projects approved. The pipeline is stuffed to bursting.”

Among the recent grant approvals is a parametric drought insurance product for Zambia, which is designed to address the human-wildlife conflict. In a drought, animals will roam beyond their reserve in search of a water pan, which leads to livestock being eaten and trampled crops. In extreme cases of retaliation or self-defence, farmers may kill the wildlife.

“It's a symbiotic relationship: we're there to protect the people, but also to encourage them not to wipe out the wildlife,” Birch explained.

Some of the parametric payout will go towards preventative activities such as water pan restoration, with some of the guaranteed payment to be directed to a compensation fund.

“What we don't want to do is a flash in the pan. It's a two-year grant, and the idea is that it's a precursor to a national compensation scheme. The government of Zambia is very keen to put in place a compensation pot. We will demonstrate to them how it works with the drought parametric to keep the compensation fund topped up,” Birch added.

Another parametric drought insurance product has been approved for Somalia in partnership with UNHCR, the U.N. refugee agency, for when the nexus of conflict and climate forces communities out of their homes. UNHCR expects 150,000 people to be forcibly displaced internally in Somalia.

“Fragile and conflict-affected states – where angels fear to tread, as it were – is where insurance can go in because it's apolitical,” said Birch.

“UNHCR will wait until people reach the informal settlement, and then we'll help them with training and education. They'll provide emergency cash, as well as grants to set up their own small businesses. In there, you've already got the idea of longevity, sustainability, and independence.”

Birch emphasised that although Humanity Insured is registered with the UK Charity Commission, the Somali drought product is not to be perceived as a form of charity.

“The idea is that, for reasons beyond people’s control, everything has been snatched away from them. It's to give back, to restore people's dignity and give them a chance to pick up where they left off. These are perfectly capable people.”

RESPONSIBLE INNOVATION

The other two recent projects approved are parametric products for extreme heat in India, one of which is in partnership with the Mahila Housing Trust and three credit cooperatives run by women living in Gujarat.

This involves individuals under the scheme (which currently covers around 26,000 women) contributing a small amount to the premium subsidy, in order to ensure that participants understand the product they are buying and when to expect a payment or not.

“It's to do with being responsible about projects. It's no good having somebody in the City of London come down from their ivory tower, as it were, saying, ‘What you need is parametric flood insurance, I'll buy you some.’ If people don't know what it is that they've been protected by, then it doesn't actually help anybody,” said Birch.

Although Birch stressed that it is not Humanity Insured’s role to create an insurance market, the organisation is concerned with creating marketable insurance products that have the same standards, cost and price.

“The product is not some sort of discount ‘We'll just quickly knock this together because those people are poor and they don't know what they're talking about’. The quality comes back to the responsible design of a project. It has to be absolutely spot on,” she said.

“I'm all for innovation, but these are human beings we're dealing with, not guinea pigs. Innovation has to be in how you implement it. It's not somebody clever in some insurance company in London saying, ‘Let's just see what happens if we do that.’”

The design of a project is highly dependent on localisation, as programmes cannot be easily replicated in other countries owing to economic, environmental and social differences.

For example, while in one country a payout may go to the women of the household in order to promote financial independence, in other countries this may put women at risk. Regional differences are also informed by varying levels of understanding and trust in insurance as a financial mechanism.

“In lots of the places we're working, in fact, insurance already exists. It could be a village savings and loans association, it could be a credit cooperative, it could be the woman who collects small amounts from everybody in the village and keeps it in a pot under her bed in case somebody needs an ambulance,” said Birch.

“In some instances, nobody trusts insurance. It comes back to being ground-up; people need to tell you what they want and how they want it to be done, rather than somebody who's never been there designing something that they think in their head should work.”