The IFRC-DREF is a vital fund that provides immediate funding for National Red Cross and Red Crescent Societies when disasters strike, especially for smaller-scale emergencies that may not attract global attention. Previously, the fund could run dry before year-end, prompting the IFRC to secure a groundbreaking - and humanitarian-sector first - indemnity insurance policy with Aon and reinsurers.
Since the start of 2023, and for an annual premium of CHF3m, the IFRC-DREF ‘pot’ has been insured on an indemnity basis. A potential payout of up to CHF15m is available if, or when, demands on the IFRC-DREF fund because of natural hazard-associated disasters hit a certain threshold – a ‘deductible’ set at CHF33m in one calendar year. For the rest of the calendar year, further demands on the IFRC-DREF for natural hazard disasters are covered by the insurance payout, up to that total maximum of CHF15m.
In 2023, the threshold was not reached so the policy did not pay out. But in 2024 it has been, with allocations to respond to Super Typhoon Yagi in Asia last week tipping IFRC-DREF spend over the insurance trigger threshold. Overall, there have been almost 100 separate IFRC-DREF allocations in 2024; combined those to respond to the impacts of eligible natural hazards have exceeded CHF 33m. When National Red Cross and Red Crescent Societies make further requests of the fund in September, October, November or December, allocations to respond to natural hazard disasters will be paid for by the commercial insurers, up to that CHF15m cap.
The IFRC’s Under Secretary General for Global Relations and Humanitarian Diplomacy, Nena Stoiljkovic, announced the insurance payout at an event at the United Nations General Assembly in New York on Wednesday.
Ahead of it, Ms Stoiljkovic said: “The triggering of the IFRC-DREF insurance policy is a significant moment. For the first time ever a single, worldwide, commercial indemnity insurance policy will pay the emergency humanitarian costs of disasters. The scale of the needs caused by 2024’s disasters is sobering. But the fact the insurance is helping with the burden is good news and proof that there are innovative finance solutions that we hope to grow in coming years.”
The IFRC-DREF insurance policy expands the impact and scale of emergency aid by the IFRC and is proof that the private sector can do more to support humanitarian organizations and our world's most vulnerable populations."
Aon’s President, Eric Andersen, made the following comment:“Three weeks ago in Béchar, Algeria, floods left 2,000 families homeless. The IFRC was there to provide shelter, blankets, food and water as they have for more than 100 years around the globe.
But this time, the aid was funded by insurance companies a half a world away, the result of an innovative risk management program pioneered by the IFRC, brokered by Aon and funded by international donors, including the UK FCDO.
And it won't be the last. Due to climate and other risks, floods in Algeria, typhoons in Vietnam and wildfires in Bolivia have left 43 million people impacted by disaster in September alone. At Aon, we believe funding should not, and cannot, stop emergency aid.
The IFRC-DREF insurance policy expands the impact and scale of emergency aid by the IFRC and is proof that the private sector can do more to support humanitarian organizations and our world's most vulnerable populations."
The IFRC has plans to grow its IFRC-DREF insurance, to widen coverage beyond disasters caused by natural hazards - to epidemics and anticipatory action, for example. It hopes grant donors will see the added value of contributing to the IFRC-DREF fund if their humanitarian contributions could potentially be multiplied in particularly calamitous years.
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