The IFRC announces the payment of the first ever disaster fund insurance

The International Federation of Red Cross and Red Crescent Societies (IFRC) has announced a milestone in humanitarian finance: for the first time, the Disaster Response Emergency Fund (DREF) has created an insurance payment due to the growing needs of disaster relief. deductible threshold.

The IFRC-DREF is a funding mechanism designed to provide immediate assistance to the National Red Cross and Red Crescent Societies in times of disaster, particularly in small emergencies that may not receive international attention. According to a press release, the fund often faced challenges of running out of resources before the end of the year, prompting the IFRC to pursue a new solution. The IFRC has obtained an indemnity insurance policy with global broker Aon and its insurers.

From the beginning of 2023, DREF is insured for an annual payment of CHF 3 million (about $3.4 million). The insurance policy allows for a potential payout of up to CHF 15 million ($16.8 million) if claims on DREF related to natural disasters exceed the deductible limit of CHF 33 million per calendar year. Once this limit is exceeded, commercial insurance will cover other needs in the fund.

Threshold has been reached for the first time

In 2023, the deductible limit was not reached, and the policy did not pay out. However, 2024 marked a turning point as combined allocations in response to various natural disasters, especially the recent Super Typhoon Yagi in Asia, pushed DREF to spend above the CHF 33 million mark. By the end of September, almost 100 different assignments had been made through DREF, underscoring the growing need for humanitarian aid.

Nena Stoiljkovic, IFRC's secretary-general for international relations and diplomacy, announced the payment at an event in conjunction with the United Nations General Assembly in New York.

“The launch of the IFRC-DREF insurance policy is an important moment,” said Stoiljkovic. For the first time, a single, global commercial indemnity insurance will cover emergency disaster relief costs.”

Stoiljkovic emphasized the magnitude of the needs caused by the disasters of 2024, adding, “The fact that insurance is helping with the burden is good news and proof that there are new financial solutions that we hope will grow in the coming years.”

Looking ahead, the IFRC plans to expand its DREF insurance coverage beyond natural disasters to include pandemic responses and preventive actions. The organization aims to encourage grant donors to see the added value of donating to the DREF fund, especially in crisis years when their philanthropic contributions can be enhanced through this form of financing.

As climate change continues to increase the frequency and severity of natural disasters worldwide, such measures will be critical to ensuring timely and effective humanitarian assistance.

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