Enabling infrastructure investment with an innovative risk transfer solution

Nepal had opportunity for a 216-megawatt run-of-river hydropower project harnessing the power of the Trishuli River.

But the 2015 Nepal earthquake severely hindered the progress of the project and made traditional insurers reluctant to provide earthquake coverage in a remote location of the dam.

This lack of coverage negatively affected the project’s investment potential, which is why lenders required earthquake insurance in order to provide financial support for the project.

Swiss Re, in collaboration with the lead lender, the International Finance Corporation (IFC), and insurance advisor Aon, structured a parametric insurance cover that met the requirements of all stakeholders.

The parametric insurance solution is triggered by the shaking intensity at the project site and based on shake maps provided by the United States Geological Survey (USGS).

The coverage provides certainty for the full five-year construction period and allows for flexibility in adjusting the insured values year-on-year, thereby reflecting any potential delays or changes in the construction process.