To Bolster Resilience and Partnerships in the Global South, Launch a Development Insurance Facility

This commentary is part of a report from the CSIS Global Development Department series entitled Global Development Recommendations for the Next Administration. 

Vulnerable populations around the world are grappling with shocks and stresses posed by extreme weather. The societal impacts associated with extreme heat, droughts, catastrophic storms, flooding, and other hazards include significant excess mortality and disruptions with negative spillover effects, such as cascading economic turmoil, instability, and population displacements. All of this is especially true for highly indebted lower-income countries and small island developing states. While resilience demands are rapidly rising on the priority lists for such countries, the United States is embroiled in geostrategic competition with the People’s Republic of China and others for partnerships with many of those very same governments across the Global South. It can be geopolitically and economically strategic for the second Trump administration to find real ways to systemically help a range of partner countries and emerging market economies to simultaneously strengthen their investment climate and their resilience in the face of extreme weather. Related investments can be good for U.S. businesses and important supply chains. The sheer scale of the challenge combined with downward pressures on U.S. and allied aid budgets indicate the need for cost-effective use of public sector derisking capabilities to incentivize and leverage greater private sector investments.

Enhanced partnerships with the evolving industry encompassing insurance, reinsurance, insurance technology, actuarial analysis, and associated financial institutions could be particularly helpful. This industry, which is foundational for the capital stack, is dominated by companies based in the United States and its allies. Specifically, both the risk mitigation associated with insurance underwriting and the investment potential associated with insurance capital pools represent levers of innovation and influence that are currently underdeveloped and undervalued within U.S. foreign policy. Years of innovative development-oriented pilot efforts by various actors have shown that insurance can underwrite and distribute risk, enable finance to operate, crowd in additional investment, advance incentives for better policies and business practices, and contribute to better data and risk management. It is time to move beyond individual pilot efforts in developing countries and establish a more systemic way of leveraging this suite of tools that enables capital deployment, sends price signals about risk, translates data into dollars, makes supply chains more resilient, and advances private sector–led development.

The Idea

As a signature foreign assistance reform effort, the new administration should shape and launch a U.S. Development Insurance Facility to foundationally help developing country partners enhance their credit and optimize the use of insurance to build greater resilience through risk management, financial investment, and stability. The initiative should be developed as a smart way to leverage the private sector while encouraging financial investments in the interests of U.S. national and economic security. The U.S. International Development Finance Corporation (DFC)—an institution created by the Trump administration to partner with the private sector on critical development challenges—must be part of the leadership of this interagency initiative, given its technical abilities, including on issues of finance, guarantees, and political risk insurance. The effort must also draw on: the strengths of the Millennium Challenge Corporation (MCC), leveraging a multiyear approach to compacts with countries and regions; the U.S. Agency for International Development (USAD), for its private sector engagement resources and ground presence; and the Department of the Treasury, for influence in the multilateral finance space. Further inputs can come from the U.S. Trade and Development Agency, the export credit agency of the United States (EXIM Bank), and others. The initiative could partner with developing country governments, multilateral financial institutions, market insurers and reinsurers, and other relevant private sector firms to enhance insurance penetration and strengthen insurance markets that could enable sound capital investments while bolstering the resilience of communities, businesses, and economies in alignment with U.S. economic and security interests.

Action Steps

To formulate and establish the U.S. Development Insurance Facility, the incoming administration should take the following concrete steps:

• Execute a rapid assessment. The transition team and early group of political appointees working across agencies on issues of international development and diplomatic, economic, and commercial engagement with the Global South should work with career experts at DFC, MCC, USAID, and the Department of the Treasury who are steeped in private sector engagement and derisking approaches. They should quickly assess the various ways these agencies (and other bilateral and multilateral agencies around the world) have already piloted innovative insurance-related programs. Some examples to explore include ARC Ltd., a mutual insurance company affiliated with the African Risk Capacity Group; The Caribbean Catastrophe Risk Insurance Facility (CCRIF); other insurance industry companies (such as AON, AXA, Blue Marble, Howden, Marsh McLennan, Milliman, Pula, and WTW) that have already made associated commitments in response to the private sector call to action under the banner of the President’s Emergency Plan for Adaptation and Resilience (PREPARE); and the Integrated Disaster Risk Management Alliance, developed through a partnership between the Insurance Development Forum (IDF) and the French Development Agency Group.
• Design the initiative. Dedicate a task force to sorting out key considerations, such as substantive objectives (e.g., the best ways to systemically engage with macro- and meso-level insurance institutions); focus countries and regions; inputs from industry and civil society; organizational structure; authorities; and budget. Early buy-in from the DFC, MCC, and USAID should be a top priority, and the initiative should incorporate strengths from each.
• Engage Congress. To enable or enhance the necessary authorities, there may be ways to tie aspects of the initiative into emerging legislation or expected reauthorizations, such as the 2025 reauthorization of the DFC. By blending economic investment opportunities and resilience, a U.S. Development Insurance Facility has the potential for bipartisan support.
• Announce the creation of the U.S. Development Insurance Facility at the 80th UN General Assembly (UNGA). The new administration should use Trump’s address at the high-level General Debate of the 80th session of UNGA in September 2025 to initially announce this leadership step by the United States and to showcase a different market- and investment-oriented way of partnering with developing countries to build their resilience.
• Launch the facility by the end of the administration’s second year. By building the initiative thoroughly while also operating apace, the administration could potentially establish this new facility by the fall of 2026, in conjunction with Trump’s return to UNGA and the United States’ turn to host the G20.

Noam Unger is the director of the Sustainable Development and Resilience Initiative at the Center for Strategic and International Studies (CSIS) in Washington, D.C.