In the second risk pool, £4.5m has been stretched to £7.3m to protect communities against droughts, floods, cyclones and heatwaves in Democratic Republic of the Congo (DRC), Somalia, Pakistan, Philippines, Bangladesh, Madagascar and Senegal. Sarah Klassen, Start Ready Programme Manager, provides reflections on the decision-making process to structure funding for the second risk pool and why this year is an important one for Start Ready.
This week, the second risk pool for Start Ready went live. Start Ready is Start Network’s financial service that pools funds and risks. It is changing the way that humanitarians are working - from reacting to crises to protecting communities ahead of them.
At last week's Start Ready Governance Committee meeting, you could feel the weight of collective responsibility hanging in the room. Decision makers had gathered together to structure Start Ready’s second risk pool. Over the course of two days, they decided how to ‘spread’ funding across 7 countries.
In the context of growing climate risks, the demand for Start Ready is high. We entered the second year of the programme with £5.5m capital available, yet £16.5m of funding was requested. Earlier, we asked NGOs in our network what their total request would be, given the need and capacity of members to respond if we had no limit to funds; this came to almost £100 million. Start Ready decision-makers grapple with this disparity.
Start Ready is so much more than a humanitarian fund. It is a risk pool. This means that instead of funding being held in different countries for different risks, funds are spread across a portfolio of countries and risks with the idea that not all risks will materialise in a given year. This allows us to ‘stretch’ donor funding further than before and prevents limited funding from sitting on standby, waiting to be used. The Committee was tasked with looking at applications from NGO networks and deciding the most effective and efficient way to structure the funds that we had. During the decision-making process, the committee drew on the advice of technical experts and looked at options to structure funds from the Start Ready capital model, ReMetrica, which is provided by AON.
This year, we are able to stretch existing funds a further 60%to a total of £7.3m. Funds will be used to protect communities from riverine flooding, cyclones, heatwaves or drought. In addition, almost £1m was allocated to enable operational preparedness work to support Start Ready activations. Some of this funding was held for ‘basis risk events’, when models misfire, and to purchase a reinsurance premium.
This week, successful Start Network members received protection from a given risk for 12 months. During this period, risks will be monitored during each country’s risk season. Each disaster risk financing system has a contingency plan that defines the danger thresholds for these risks. When these thresholds are met, funding will be immediately released so that NGOs can anticipate and respond to risks earlier.
In the second year of the programme, we have reached a new milestone. For the first time, we have been able to purchase a reinsurance policy for the risk pool. This means that, if the amount of funding available dips below a certain amount, we will receive an insurance payout. Reinsurance provides yet another layer of protection to the communities that Start Ready is serving. It also enables us more confidently to increase the amount we are dispersing for each Start Ready activation, whilst reducing the pool’s ‘risk of insolvency’, meaning the likelihood that we’ll run out of funds. Reinsurance is another way we can maximise the potential impact of donor funds amidst growing humanitarian needs.
As a network, we continue to navigate growing climate risks and compound risks that occur when multiple hazards happen at once. We know that humanitarian relief and development programming are needed at the same time to address these challenges. This is often referred to as ‘a nexus approach’ and is increasingly being emphasised as a solution to humanitarian problems. Start Ready requires humanitarian and development actors to work more closely together so that we can better anticipate and respond to risks. Christina Bennett, Start Network’s CEO, reflected last week that, ‘‘As a group, we don’t think about things in terms of ‘humanitarian’ or ‘development’, we think about the problems we see and how we can solve these problems’’.
Every time the Start Ready Governance Committee convenes, I’m acutely aware that it is a unique group. Members are coming from many different areas of work including the humanitarian, development, climate, financial and the private sectors. It also has representatives from both local and international NGOs. This reflects Start Network’s desire to increase decision-making power of local actors as the concentration of power, influence and resources in the humanitarian system still lie in the global North. Yet local organisations are responsible for the vast majority of humanitarian responses.
I often hear Start Network team members or staff from NGOs who have been part of the programme since its inception refer to Start Ready as, ‘The Baby’. This feels fitting considering the numerous hours and the painstaking level of care and that so many have committed to the programme. After all, Start Ready is new, it is growing and it is constantly learning from experience. As we enter our second year, I’m hopeful about what we can achieve and I echo the words of one colleague that, ‘Start Ready is a new baby. But the baby is bold and brilliant’.
Start Ready is funded by: UK Foreign, Commonwealth and Development Office, Margaret A. Cargill Philanthropies, IKEA Foundation, Irish Aid, French Ministry for Europe and Foreign Affairs, Netherlands Ministry of Foreign Affairs, Swiss Re Foundation, Howden Group Foundation and German Federal Foreign Office.