RMS, Swiss Re among partners that will create insurance-based products to support resilient infrastructure investment

The Rockefeller Foundation, Swiss Re, Goldman Sachs and risk modeller RMS have partnered to help launch a new program meant to design and structure new insurance-based products to generate capital for risk-reduction projects.

The RE.bound program leverages innovative risk transfer solutions as a mechanism for resilient infrastructure project management

re:focus partners, a design firm dedicated to developing integrated resilience solutions and innovative public-private partnerships for vulnerable communities, last week announced the first step toward creating a new financial product to support resilient infrastructure investment.

The firm, working with The Rockefeller Foundation, Swiss Re, Goldman Sachs and RMS, is launching RE.bound, a new program that leverages innovative risk transfer solutions as a mechanism for resilient infrastructure project finance, notes a joint statement issued by RMS.

Planning for resilience projects is a public investment challenge because the benefits are diffuse and realized far into the future, RMS reports. And when the financial benefits of resilience investments are not identified ahead of time, infrastructure spending stays stuck in traditional projects.

With RE.bound, the intention is to model the financial benefits of specific resilient infrastructure projects upfront and to integrate insurance coverage with investment in long-term risk reduction.

Through RE.bound, the aforementioned private sector leaders are taking steps to design a new catastrophe bond-like product that can promote project-based risk reduction solutions, the statement notes.

“These new types of instruments would realize the potential insurance benefits from infrastructure improvements and monetize the physical and financial risk reductions associated with investments in resilient systems, such as seawalls and green stormwater infrastructure,” the statement adds.

“Developing solutions which generate funds for resilient infrastructure projects and produce rapid recovery funds will help society translate resilience from talk into action,” Alex Kaplan of Swiss Re says in the statement.

“We are confident that well-structured risk transfer mechanisms can both help communities recover more quickly from severe shocks and make them more resilient ahead of potential disasters,” notes Judith Rodin, president of The Rockefeller Foundation.

Ben Brookes, vice president, Capital Markets at RMS, comments that “cat bonds can be powerful tools to encourage risk mitigation efforts, facilitate rebuilding after a disaster and create a more resilient society.”

Adds Ali Al-Ali, managing director and co-head of Insurance Structured Finance at Goldman Sachs: “This program would use catastrophe bond technology to ultimately reduce site-specific insurance costs and promote investments in resiliency measures.”

If the RE.bound structure is viable, the statement notes, it will be announced at the UN Climate Change and Sustainable Development Goals conferences in Paris in December 2015.