PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Project Name
Region
Sector
Project ID
Borrower(s)
Report No.: AB5881
Southeastern Europe and Caucasus Climate Change and
Catastrophe Risk Insurance Facility
EUROPE AND CENTRAL ASIA
Non-compulsory pensions, insurance and contractual savings
(70%);General water, sanitation and flood protection sector (30%)
P110910
Ministry of Finance, Governments of : Armenia, Bosnia and
Herzegovina, Bulgaria, Croatia, Georgia, Macedonia, Moldova,
Montenegro, Poland, Romania, Serbia
Implementing Agency
Environment Category
Date PID Prepared
Estimated Date of
Appraisal Authorization
Estimated Date of Board
Approval
EUROPA Reinsurance Facility Limited (Europa RE)
c/o Reichlin & Hess
Hofstrasse 1a
6300 Zug
Switzerland
Mr. Heinz C. Vollenweider, Chairman of the Board
heinz.vollenweider@europa-re.com
Tel: +41 443 80 50 90
[ ] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined)
March 15, 2010
July 6, 2010
November 30, 2010
1. Key development issues and rationale for Bank involvement
Countries of Southeastern Europe and the Caucasus (SEEC) are highly vulnerable to natural
hazards. Ninety percent of the area of Southeastern Europe is located within trans-boundary
river basins, which makes the region highly prone to floods. Due to climate change, the
frequency and severity of natural disasters, particularly those of hydro-meteorological origin, are
rising in all SEEC countries. The Balkans and the Caucasus, located on the intersection of two
continental plates, have suffered some of the most damaging earthquakes in the recent past and
remain highly vulnerable to both small and large quakes.
Natural disasters in the ECA Region exact severe human, physical and economic losses to
both governments and populations - particularly the poor. The financial crisis has already
weakened many national economies and threatened livelihoods, making the population even
more vulnerable to the effects of natural disasters. Globally, economic losses from climaterelated and geological perils are rising, averaging US$100 billion per annum over the last
decade. The Moldovan economy, based as it is on agriculture, has been particularly affected by
a series of floods and droughts, hailstorms and frosts over the past decade. In addition to the
economic toll, natural disasters have been the source of death, disability, and loss of physical and
productive assets.
Governments in the region have extremely limited capacity to assist their populations in
regaining assets and productive capacity destroyed by natural disasters. The 2001 Bosnia
floods caused damage worth 32 times the amount allocated by the Government for emergencies.
The 1994 Moldova floods caused damage worth 176 times the amount allocated by the
Government. In Armenia, 20 years after the Spitak Earthquake, a sizable proportion of the
displaced population is still living in temporary housing. For this reason, one of the basic tenets
of disaster risk mitigation is the transfer of the financial risks of disasters from the public to the
private sector.
Catastrophe insurance among homeowners, small and medium size businesses (SMEs) and
farmers is currently almost non-existent in the region (only 1- 5 houses out of 100 currently
have private catastrophe insurance coverage). Consumers often do not understand the need for
such insurance, believing that the government or donations will cover their losses in case of a
natural disaster. Local insurers have been reluctant to offer catastrophe insurance since risk is
not well diversified on an individual country level, reinsurance for catastrophe risks is not readily
available at a price supported by the local market, and risk management requirements for
catastrophe risk are complex and often well beyond the technical capabilities of local insurers.
Therefore, the catastrophe insurance products that do exist are usually too expensive for most
homeowners and SMEs as companies ration the availability of catastrophe coverage through
higher prices.
Catastrophe risk insurance is one of the pillars of the Bank Group’s Disaster Risk Mitigation
Strategy. The Kyoto Protocol, the UN Framework Convention on Climate Change and the Bali
Action Plan all call for risk sharing and transfer mechanisms such as insurance as a means of
protecting populations from the adverse effects of climate change. Catastrophe risk insurance is a
means of transferring the financial and fiscal risk of disasters from government to the private
sector. This not only protects the national economy as well as homeowners and SMEs, but
enables more effective targeting of government assistance following a disaster, all of which
become increasingly important with the global financial crisis.
The World Bank has experience in facilitating the establishment of national and regional
insurance pools, both disaster-related (such as the Caribbean Catastrophe Risk Insurance
Facility, the Turkish Catastrophe Insurance Program, the Romanian Catastrophe Insurance Pool)
or non-disaster related (the African Trade Insurance Facility). The World Bank, jointly with its
regional partner, the Regional Cooperation Council, as well as the UN ISDR, is addressing the
problem of low catastrophe insurance penetration in Southeastern Europe and the Caucasus
through the creation of the regional Catastrophe Risk Insurance Facility (SEEC CRIF), which
has been recently incorporated as “Europa Reinsurance Facility Ltd” (EUROPA RE).
2. Proposed objective(s)
The Project Development Objective (PDO) is to increase homeowners’, farmers’ and SMEs’
access to financial protection from losses associated with natural disasters. The PDO will be
achieved through supporting the creation of the SEEC CRIF – a specialized regional reinsurerwhich in turn will enable a rapid expansion of climate change and catastrophe insurance
penetration among homeowners and SMEs in participating countries. The SEEC CRIF will
provide reinsurance and technical assistance services to primary insurers in risk pricing,
underwriting and catastrophe risk management. These services will be offered in supplement to
those which may be offered by the private sector, or in cooperation with the private sector.
3. Preliminary description
The project is designed as a horizontal and vertical APL that would provide funding for
individual countries to participate in EUROPA RE as shareholders. Although the project focuses
on the countries of Southeastern Europe and the Caucasus which have active World Bank
portfolios, membership in EUROPA RE is open to other countries in the region which have
already joined the European Union.
EUROPA RE is designed as a regional insurance pool to benefit from economies of scale,
diversify the risks, increase the market and lower the prices for catastrophe insurance products.
Risk modeling and development of insurance products is time-consuming and expensive.
Individual countries present relatively small markets and undiversified risks, making them
unattractive to providers of catastrophe insurance and reinsurers. By pooling the risks and
resources across a larger region: (a) investments in insurance risk modeling become more
effective; (b) there is a larger potential market for catastrophe insurance products; (c) the risks
are diversified, making the provision of such products both less expensive for consumers and
more attractive to insurers; and (d) insurance policies can more easily be packaged for coverage
by the global reinsurance market. In addition, this approach mirrors the trans-boundary character
of most natural disasters, which often affect a number of neighboring countries. Many
governments are already cooperating on a regional basis to mitigate the risks and effects of
disasters and this approach has been supported by the Regional Cooperation Council and the
Disaster Prevention and Preparedness Initiative.
The project comprises the following two components:

Component 1: Participation in the SEEC CRIF. The project will support SEEC
countries’ efforts to join SEEC CRIF by financing their equity contributions into the reinsurance Facility. SEEC CRIF will be set up as a genuine Public-Private Partnership.

Component 2: Technical assistance for supporting legislative framework: The project
will support technical assistance to help countries ensure appropriate regulatory,
legislative and policy frameworks to support catastrophe risk insurance.
Institutional Arrangements: In its initial stage, the Facility will be owned and governed by
member countries, due to the critical importance of governments in creating and supporting the
demand for catastrophe insurance among homeowners and SMEs. SEEC CRIF will be managed
by a competitively-selected, special purpose, privately-owned insurance services firm that will
provide underwriting, pricing and risk management support to the local primary insurers, as well
as placing reinsurance on behalf of SEEC CRIF and, if necessary, entering into alternative risk
financing arrangement with risk capital providers.
Governance Structure: To ensure that the management of SEEC CRIF is immune from potential
political pressures that may adversely affect its operational and financial performance, one of the
key elements envisaged by the business plan is a clear separation of the company’s business
operations from the government ownership of the Facility. To this effect, EUROPA RE has an
independent professional board of directors consisting of reputable insurance/reinsurance
professionals with a well established track record in the industry. Overall strategic oversight and
policy advice will remain with the company’s shareholders (the Ministries of Finance of the
member countries) and exercised through the Annual Meetings of Shareholders and the Advisory
Policy Board. The government shareholders will be able to sell up to 30% of their shares in 3
years from the commencement of SEEC CRIF operations and up to 100% within 5 years to
private investors. EUROPA RE will be domiciled and regulated in Switzerland which has a
highly advanced and sound insurance regulatory regime.
4. Safeguard policies that might apply
Safeguard Policies Triggered
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
Yes
No
X
X
X
X
X
X
X
X
X
X
5. Tentative financing
Source:
BORROWER/RECIPIENT
International Bank for Reconstruction and Development
International Development Association (IDA)
Total
6. Contact point
Contact: Alison C. N. Cave
Title: Senior Urban Development Specialist
Tel: (202) 473-3952
Email: Acave@worldbank.org
($m.)
0
32
19.5
51.5
TBD