RE.bound – New Insurance Product to Support Risk-Reduction Projects

Last week, a team of private sector companies announced the first step toward creating a new financial product designed to support risk reduction projects and resilient infrastructure investment.

Together with The Rockefeller Foundation, Swiss Re, Goldman Sachs and RMS, re:focus partners is launching a new program called RE.bound, a catastrophe bond-like product that can promote project-based risk reduction solutions.

Judith Rodin, President of The Rockefeller Foundation, said “RE.bound will use the expertise of leaders in investment banking, reinsurance, infrastructure, and climate risk analysis.  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.”

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.

According to re:focus, planning for resilience projects is a public investment challenge because the benefits are diffuse and realized far into the future. Infrastructure spending stays stuck in traditional projects when the financial benefits of resilience investments are not identified ahead of time. For example, the savings from risk mitigation efforts are rarely measured in coastal communities that don’t flood regularly. RE.bound intends to fix this problem by modeling the financial benefits of specific resilient infrastructure projects upfront and integrating insurance coverage with investment in long-term risk reduction.

“Catastrophe models are crucial to understanding risk and structuring robust catastrophe bonds,” said Ben Brookes, Vice President, Capital Markets at RMS. “Cat bonds can be powerful tools to encourage risk mitigation efforts, facilitate rebuilding after a disaster and create a more resilient society. We are excited to work with RE.bound to extend their use into new areas.”

RE.bound is still in its early stages, but if the structure is viable, it will be announced at the UN Climate Change and Sustainable Development Goals conferences in Paris in December 2015.

“RE.bound is an exciting next step to our work on the RE.invest Initiative,” said Shalini Vajjhala, Founder and CEO of re:focus partners. “This new program builds on the local resilient infrastructure solutions developed through RE.invest to create a global financing opportunity for cities around the world.”

About Re:focus Partners

Re:focus partners is a design firm dedicated to developing integrated resilience solutions and innovative public-private partnerships for vulnerable communities around the world. Through large-scale programs like the RE.invest Initiative, re:focus identifies systemic opportunities for innovation to create both public value and new private investment potential through projects with sound financial returns and economic, social, and environmental integrity for the communities they serve. For more information, please visit: www.refocuspartners.com.