Solution: Aggregate the exposures of many cities into a single facility so that economies of scale and risk sharing between insurers and reinsurers reduce the cost of cover for critical urban infrastructure, and give cities rapid access to funds to rebuild after an extreme weather event.

Key challenge: About 70% of cities in Latin America and the Caribbean face high risks from natural hazards and extreme weather events that can damage critical infrastructure and disrupt the lives of residents, yet individually many of these cities find insurance difficult to access or afford, and few have reliable funding available for recovery when a disaster strikes.

Context: Public funding alone cannot meet the scale of investment that place-based resilience requires, and private capital needs a defined return, a measurable outcome and a credible counterparty. Risk-pooling addresses this for cities: aggregating the exposures of many communities or cities creates portfolios large and diversified enough to attract private insurance and reinsurance capacity, often supported by public funds that cover what the market alone will not. The Urban Infrastructure Insurance Facility was established to address this gap across urban areas and critical infrastructure in Latin America and the Caribbean. It is financed by the KfW Development Bank on behalf of the German government and implemented by the International Council for Local Environmental Initiatives (ICLEI) - Local Governments for Sustainability, as a contribution to the InsuResilience Global Partnership.

Solution in practice: Selected cities undertook a risk assessment of their key assets and areas, which informs insurance coverage tailored to their specific needs. Cities were also provided with a detailed review of their adaptation and disaster response and recovery capabilities, alongside a set of recommendations to strengthen these areas and highlight where risk transfer gaps remain. These products transfer the cities' climate risks to a risk pool that uses economies of scale and risk sharing between insurers and reinsurers, reducing insurance costs for cities. After extreme weather events, cities benefit from rapid access to the pool's financial resources to rebuild critical infrastructure and help vulnerable residents cope with the impacts. Implementation follows a seven-stage roadmap covering city screening and selection, urban risk assessment and capacity development.

Impact / outcome: Aims for EUR 100m of tailored cover protecting at least 7.5 million people.

Next steps: The facility aims to provide tailored insurance coverage worth €100 million ($117 million), protecting at least 7.5 million people in participating cities. As implementation progresses, its experience can offer a tested template for other regions: the risk assessment methodology, the pooling structure and the seven-stage roadmap are all designed to be replicable. While the fund provides resources to rebuild, it is important that infrastructure is built back better and more resiliently. Existing and new risk pools elsewhere could draw on this model when considering how to extend coverage to critical urban infrastructure and vulnerable residents. The playbook adds, under action area 3b, that both existing and new natural catastrophe risk pools could consider incorporating place-level recognition - along the lines of the Community Rating System - into their design. Under action area 2b it also identifies the need for municipal financing vehicles that are more replicable: pre-disaster resilience financing that releases capital for risk reduction before an event, for example through instruments that reward municipalities as they reach agreed resilience milestones, and blended vehicles combining government grants, low-cost loans from public or development banks and private investment in standardized structures that can be adopted elsewhere rather than rebuilt from scratch.

Organizations involved:

Authoring: World Economic Forum; Marsh; ICLEI - Local Governments for Sustainability

Actors: KfW Development Bank; InsuResilience Global Partnership

Implementation partners: Local Governments; Insurers; Investors & Banks; Civil Society Organizations; Regulators & Policymakers