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Swiss Re enters into a weather derivative contract with the World Bank covering drought in Malawi
Swiss Re announced that it has entered into a weather derivative contract with the
International Development Association (IDA), the arm of the World Bank that helps the
world’s poorest countries. Under the terms of the contract, Swiss Re will pay out up to
USD 5 million in the event that Malawi’s farmers suffer from a drought-related shortfall
in maize production. With this transaction, the IDA backs its first-ever weather
derivative contract with the Government of Malawi.
”The weather derivative contract with the World Bank is a prime example of an ex-ante
disaster risk management strategy designed to mitigate the financial impact of drought
for a country such as Malawi that is heavily dependant upon the income from its
agricultural production,” said Juerg Trueb, Swiss Re’s Head of Environmental and
Commodity Markets.
The World Bank, working together with the Government of Malawi, structured the contract
as an option on a rainfall index. The index links rainfall and maize production, so that
if precipitation falls below a certain level the index will reflect the value of the
projected loss in maize production. The maximum payout is reached if maize production
drops to 10% below the historical average.
“This weather derivative contract is just one instrument as part of a World Bank effort
to deliver customized financial solutions and help members plan efficient responses to
catastrophic events. The use of weather derivatives are most effective as part of a
broader risk management strategy,” said Gloria Grandolini, Director of the World Bank
Treasury’s Banking and Debt Management Department.
Juerg Trueb concluded: “The execution of the contract between the World Bank and Swiss
Re demonstrates the ability and the interest of the international risk transfer markets
to absorb such risks.”
Swiss Re has pioneered weather risk transfer instruments in developing countries,
starting in India in 2004 with a programme reaching over 350 000 smallholder farmers. In
the meantime, the company has become a leading solution provider in weather and weather
contingent commodity price structures with a share of more than 30% in the worldwide
weather risk markets. Under its Climate Adaptation and Public Sector Business
Development Programmes, the company fosters the use of modern risk management
instruments, such as weather derivatives and insurance-linked securities, to the benefit
of non-OECD countries.
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Ueber Swiss Re:
Swiss Re is one of the leading global reinsurers. We offer a wide range of
traditional reinsurance products and related services, which are
complemented by insurance-based corporate finance solutions and
supplementary services.
Our core business segments are: risk transfer, risk finance and asset
management.
Our financial strength receives excellent ratings from leading agencies.
Next to our financial resources, our employees' knowledge is one of our
primary competitive advantages.
Swiss Re is a recognised expert in the field of risk and capital
management. While our stated goal is not necessarily to be number one in
terms of volume, we aspire to global leadership in terms of value for
clients and shareholders, and professional development and opportunities
for all our employees.
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Versicherungen
Versicherungen
Kontakt:
Swiss Re / Versicherung24.ch
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