IDB and IDB Invest Expand Disaster Risk Tools to Boost Resilience in LAC

The Inter-American Development Bank (IDB) and IDB Invest have announced a significant expansion of financial instruments designed to help countries and private companies across Latin America and the Caribbean (LAC) better manage the growing risks posed by natural disasters and external shocks. This initiative dramatically scales up the region’s financial safety net by introducing new mechanisms and enhancing existing programs, ultimately strengthening long-term resilience, risk transfer capacity, and investment stability.

A New Era of Financial Protection in the Face of Climate and Disaster Risk

With climate change intensifying the frequency and severity of extreme weather events—ranging from hurricanes to droughts and wildfires—the IDB Group is addressing the urgent need for robust, agile, and inclusive disaster-risk finance mechanisms. This move builds on the “Ready and Resilient Americas” program, launched in March 2025, which aims to boost regional coordination, disaster preparedness, and financial response capacity.

IDB President Ilan Goldfajn highlighted the motivation behind the new initiative:

“We are scaling up financial protection to help countries and companies manage disaster risks more effectively. With these new tools and coverage, we are strengthening resilience, accelerating recovery, and making sure that financing is available when it’s needed most.”

Expanded Sovereign Protection: $2 Billion More in Coverage

The IDB will expand its disaster risk coverage by $2 billion, targeting the dual pillars of sovereign contingent financing and innovative debt restructuring tools:

• Contingent Credit Facility for Natural Disasters (CCFND): This facility, which offers fast-disbursing liquidity in the event of major disasters, will be scaled up by $1 billion, increasing total coverage to $5 billion by 2026. It ensures that countries can rapidly deliver emergency relief, restore essential public services, and address health crises.

• Climate Resilience Debt Clauses (CRDCs): These clauses allow eligible sovereign borrowers to pause debt repayments after a qualifying disaster, preserving fiscal space for urgent recovery efforts. The IDB is expanding CRDC coverage to $4.2 billion by 2026, including $1 billion in new commitments.

Regional Disaster-Risk Transfer Program: Opening Access to Global Markets

Another highlight of the initiative is the Regional Disaster-Risk Transfer Program, spearheaded by the IDB. This program supports vulnerable and low-access economies in shifting disaster risk exposure—such as from floods, earthquakes, or hurricanes—onto global insurance and capital markets.

The pilot phase will support Belize, Honduras, and Panama, enabling them to secure insurance and risk-pooling arrangements. In future phases, the program will broaden its reach through regional risk pools and market-access strategies, with Spain and France expressing interest in offering financial and technical support.

This program positions the IDB as a central facilitator in global disaster-risk transfer architecture for the LAC region.

Private-Sector Business Resilience Program: First of Its Kind

For the first time, IDB Invest is launching a Business Resilience Program to support private-sector firms exposed to disaster and external shocks. Unlike typical sovereign-focused disaster clauses, this mechanism targets private investments, especially in sectors like infrastructure, tourism, agribusiness, and energy.

Key features of the program include:

• Resilience debt clauses that allow for tenor extensions and principal deferrals of up to two years in the event of severe shocks.

• Flexibility to de-risk private transactions, promoting continued investment flows even during crises.

• Coverage for a broad spectrum of external shocks—beyond just climate—making this a pioneering tool among multilateral development banks (MDBs).

While commercial lenders have begun experimenting with similar clauses for climate events, IDB Invest is the first MDB to institutionalize this model, setting a new standard for innovation and inclusivity in development finance.

Advancing Financial Resilience for the Future

With these new offerings, the IDB Group is advancing a holistic financial resilience agenda, merging sovereign and private-sector solutions to address a wide range of risks. These tools not only offer rapid relief after disasters but also encourage long-term investments, knowing that mechanisms are in place to safeguard capital during turbulent times.

This expansion directly supports the goals of global initiatives such as the Financing for Development agenda, the Bridgetown Initiative, and the Global Shield against Climate Risk. The IDB’s commitment to climate adaptation, fiscal preparedness, and investment resilience ensures that countries and companies in Latin America and the Caribbean are better equipped to face an uncertain and volatile future.