London — Mayer Brown has advised parametric and index-based risk transfer start-up Global Parametrics on the launch of the Natural Disaster Fund through an innovative climate insurance initiative backed by the UK and German governments.
The initiative uses bespoke parametric risk transfer and advanced climate risk modeling developed by Global Parametrics to support offerings that deliver affordable insurance-style solutions to smallholder farmers in six countries in Africa and Asia, for instance, offerings like the recently-launched African and Asian Resilience in Disaster Insurance Scheme (ARDIS). When a natural disaster occurs, Global Parametrics triggers the terms of the contract, and provides contingent liquidity and risk capital through the Natural Disaster Fund to VisionFund International's microfinance providers.
Mayer Brown worked with Global Parametrics on a pro bono basis advising on the initial structure, as well as corporate and regulatory matters; and subsequently on the creation of a complex OTC weather/catastrophe derivative, working to structure and document the first transaction with VisionFund. This derivative product has the potential to be replicated on a larger scale and applied in other settings.
This project forms part of the wider pro bono efforts at Mayer Brown. The guiding purpose of the Firm's pro bono programme is to attack systemic problems, providing high quality legal advice to those in need. Pro bono clients include charities, non profit organizations and individuals who we give legal advice, free of charge, in our areas of expertise.
Corporate & Securities partner Colin Scagell commented: "We are very proud to have been involved in the outstanding work that Global Parametrics performs in aid of those affected by natural disasters, and look forward to seeing the eventual results of this first transaction on the ground. It is a “first-of-its-kind” transaction which transforms the unique climate models developed by Global Parametrics into a product capable of financially supporting micro-lenders when they are most in need, as in immediately following the occurrence of a natural disaster."
Global Head of Derivatives & Structured Products partner Edmund Parker commented: "This is a truly innovative derivative product that combines aspects of OTC weather derivatives and bespoke climate-linked proprietary indices. Although it has been applied within relatively narrow parameters here, market participants would be able to take its structure and apply it on a much larger scale."
Jerry Skees, Chief Strategy Officer and Director of Global Parametrics, commented: “Mayer Brown’s sound regulatory advice and ability to find solutions to the inevitable challenges associated with structuring such a new product were instrumental in bringing the Natural Disaster Fund to market. Their investment of pro-bono time is hopefully a reflection of the potential that they see in our approach to improving resilience and recovery amongst vulnerable communities in low to middle income countries so we look forward to sharing our impact with them as the Natural Disaster Fund gains traction.”
The Mayer Brown team in London was led by Corporate & Securities partner Colin Scagell and Global Head of Derivatives & Structured Products partner Edmund Parker, assisted by counsel Marcin Perzanowski, and associate Alice Harrison.