The Global Shield Financing Facility's Stories of Impact | COP28 Special: Collaborating with Private Sector for a Sustainable Future

Across all Global Shield Financing Facility (GSFF) engagements with governments, the private sector remains a key partner. Particularly for design of risk transfer solutions and for placement of risk, governments rely on risk modelers, actuaries, and brokers as well as domestic and international markets. GSFF recognizes that private sector engagement is key for strengthening domestic insurance markets and accessing international reinsurance markets. The GSFF provides grants to support the design and implementation of financial solutions, including risk transfer solutions. Most developing countries lack well-developed domestic markets, and this limitation often acts as a barrier to international (re)insurance and capital markets. Through GSFF support, countries are able to strengthen their domestic markets and also leverage the capacity of international markets to expand the coverage of the risk transfer instruments they develop.

• In Rwanda, the technical and financial support provided by the Global Risk Financing Facility (GRiF, from which the GSFF evolved) is enabling the use of risk-sharing facilities for shock response, and these facilities are being reinsured by domestic and international markets. The aim of the GRiF grant is to partially capitalize a bridge lending to provide MSMEs affected by a disaster with emergency lending for recovery post disaster.
• In Mozambique, the government purchased a sovereign-level insurance policy covering tropical cyclone and precipitation risks, bringing together both local and international insurers. This approach resulted in a US$970,000 payout to the government during Cyclone Freddy, which occurred early in 2023. The predominant advantage of involving the private sector was the introduction of extra capacity and specialized expertise.
• The Government of Djibouti recently purchased a sovereign insurance policy from the African Risk Capacity to cover the country against flash flooding and drought risks. 

By leveraging the strengths of various partners, the GSFF can help mobilize significant volumes of private risk capital for addressing the financial protection gap. Stakeholders and collaborators range from domestic insurers, brokers, and risk modelers to reinsurers and operations managers. The private sector is home to many experts who contribute technical and operational knowledge. Partnerships extend past the instruments themselves; for example, collaboration with entities like the Insurance Development Forum enables capacity-building initiatives and creates pathways toward meaningful engagements with the private sector. Harnessing the prowess of diverse partners amplifies the role of private risk capital in disaster risk finance and helps close the insurance protection gap in developing nations.

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*The Global Shield Financing Facility comprises programs transferred from the Global Risk Financing Facility, alongside new initiatives to be developed under the Global Shield against Climate Risks.