Cash & Liquidity ManagementInvestment & FundingSwiss Re, Goldman in Resilient Infrastructure Project Finance Initiative

Swiss Re, Goldman in Resilient Infrastructure Project Finance Initiative

RE.bound, an insurance-based product to generate capital for risk-reduction infrastructure projects that boost the resilience of cities, is being developed by a group of partners that includes Goldman Sachs and reinsurer Swiss Re.

Together with The Rockefeller Foundation, design firm re:focus partners and catastrophe risk modelling specialist RMS, Goldman and Swiss Re aim to develop a new catastrophe bond-like product. Its aim would be to recognise the insurance benefits for resilient infrastructure projects and integrate insurance coverage with investment in long-term risk and reduction – such as seawalls and green stormwater infrastructures.

Provided the proposed structure proves to be viable, it will be announced at the UN Climate Change and Sustainable Development Goals conferences in Paris in December 2015.

The project partners note that planning for resilience projects is a public investment challenge as the benefits are diffuse and realised 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 modelling the financial benefits of specific resilient infrastructure projects upfront and integrating insurance coverage with investment in long-term risk reduction.

“At The Rockefeller Foundation we recognise that in order to solve today’s challenges, communities need innovative tools, such as these new bonds, that have the potential to transform how they think and operate through a resilience lens,” said Judith Rodin, the Foundation’s president.

“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.”

“Goldman Sachs has been involved in structuring catastrophe bond transactions for a variety of clients to provide efficient risk reduction,” said Ali Al-Ali, the bank’s managing director and co-head of insurance structured finance. “This programme would use catastrophe bond technology to ultimately reduce site-specific insurance costs and promote investments in resiliency measures.

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