Humanitarian organisations are looking to sustainable finance and the broader capital markets to mitigate the effects of a looming liquidity crisis as the impact of the United States Agency for International Development funding freeze continues to ripple through the sector.

The Humanitarian Finance Forum’s Simon Meldrum explains how the insurance industry can help to tackle the humanitarian crisis caused by climate change.

Donors are lagging as wars and climate change push global aid needs to record highs, with vulnerable groups hit by the cash crisis.

Governments use so-called parametric insurance to insure against specific named events. But this insurance has limits: insuring against a specific parameter or trigger event means leaving out everything not specified or not – quite – severe enough. The International Federation of Red Cross and Red Crescent Societies' solution to this problem is a first in the humanitarian sector: an innovative, indemnity insurance policy that insures the pot itself.

Simon Meldrum spoke to ESG Insurer following the organisation’s London Summit last month, which brought together experts from humanitarian organisations, foundations, insurance companies and the UK government to discuss scaling global risk transfer mechanisms through the financial markets for climate-resilient humanitarian response.

Speaking at the London Summit, which was co-hosted by the Humanitarian Finance Forum, Mike Adamson CEO of the British Red Cross said that “climate change, the failures of governments and humanitarian needs”