Launched in 2015 and focused on developing countries, the InsuResilience Investment Fund (IIF) is dedicated to increasing access for low-income households as well as micro-, small and medium-sized enterprises to financial services that increase their resilience to climate change. The report focuses on IIF’s “achievements in facilitating adaptation of climate insurance to improve productivity and resilience of smallholder farmers and agribusinesses.” As of September 2020, IIF has invested USD 133 million in 21 investee companies based in 14 countries. These companies serve 25 million beneficiaries in 25 countries. BlueOrchard Impact Investment Managers, which is based in Switzerland, manages the fund.
IIF uses a blended finance model, combining private and public investment through: (1) IIF Debt Sub-fund, which has USD 150 million in assets, providing private debt financing to aggregators and microfinance institutions; and (2) IIF Equity Sub-fund, which has assets valued at USD 80 million, placing equity in insurance companies as well as data and software providers. To encourage private investors to participate, IIF has reduced their risk with EUR 57 million (USD 64 million) in
first-loss funding from Germany’s Federal Ministry of Economic Cooperation and Development, which is also known by its German acronym BMZ.
In addition, BMZ has funded two grant accounts that support IIF. A technical assistance facility of USD 13 million provides strategy and business expertise to investees. The authors report that this has improved market penetration by tackling challenges such as high transaction costs, low market awareness and “negative perceptions of the value of climate insurance.” A premium support facility of USD 7.3 million temporarily subsidizes selected investees to enhance client outreach and lower the premiums of new products.
IIF is projected to reach 90 to 145 million indirect beneficiaries by the end of 2025, an extension of the same goal previously set for 2020. It has taken longer than expected for investees to build strategic partnerships with insurers and distributors as well as to develop products and achieve regulatory approvals. Meanwhile, investees launching new products in 2019 and early 2020 experienced slower growth due to the COVID-19 pandemic. However, the authors foresee notable expansion in outreach, as approximately one third of IIF’s investees are too early in their work to have reported significant progress. Also, IIF plans to add up to 15 additional investees in the coming years.
This is a summary of a paper by Will Bugler, Lydia Messling, John Firth, Virginie Fayolle and Maribel Hernández; published by InsuResilience Investment Fund; October 2020; 48 pages; available at https://www.blueorchard.com/protecting-low-income-communities-though-climate-insurance/
By Romil Pandey, Research Associate
Additional Resources
IIF homepage
https://www.insuresilienceinvestment.fund/
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