Lloyd’s has announced a pioneering disaster resilience vehicle with the United Nations Capital Development Fund to deliver disaster-risk financing to small-island developing states in the Pacific.

The launch of this groundbreaking vehicle, developed in partnership with the UNCDF, Lloyd’s and Aon, supports the Sustainable Markets Initiative Insurance Task Force’s commitment made at COP26 to drive tangible action to support the resilience of climate-vulnerable countries.

Supported by members of Lloyd’s Disaster Risk Facility, the organisation said the Global Disaster Resilience Vehicle will enhance recovery and resilience, utilising the global reinsurance market as a capacity provider.

The vehicle will leverage donor funds committed to the region and utilise local networks to provide exposure-based payments directly to climate-vulnerable communities.

Leveraging capacity from the global reinsurance market, Lloyd’s said it will work in partnership with the local industry to identify their resilience needs and secure the necessary capacity to deliver coverage.

It added that this could mean doubling the total amount insured from $1,000 to $2,000 per policy per year, with up to 100 per cent compensation per event.

Initially covering Fiji, Papua New Guinea and Samoa, the vehicle will respond to disasters caused by natural perils including tropical cyclone, earthquake, tsunami and flood — with the long-term aim of scaling and replicating the vehicle throughout the Pacific region as well as the Caribbean, Asia and Africa.

Building on Lloyd’s commitments set out through a memorandum of understanding with the UNCDF in September 2023, Lloyd’s and Aon will support the scaling-up of the UNCDF’s existing programmes to close the protection gap for the populations in the Pacific islands.

The announcement comes as part of the Commonwealth Heads of Government Meeting in Samoa, where private sector leaders gathered this week to discuss the sustainability and resilience challenges facing Commonwealth countries, and the practical solutions to support resilience-building initiatives in the communities most affected by climate change.

During CHOGM, Lloyd’s will join fellow SMI chief executives to present the vehicle to King Charles III, founder of the SMI as the Prince of Wales, and outline further support of lighthouse project initiatives led by the group.

John Neal, Lloyd’s chief executive, said: “The insurance industry has been engaged in disaster risk finance for decades and has an increasingly important role to play in providing capital and tailored investment solutions to build resilience.

“Establishing this new vehicle reinforces the crucial role Lloyd’s and the [insurance and reinsurance] industry plays in supporting communities within the Pacific Islands to respond and recover quicker from disaster.”