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The disaster bond is a high-risk bond where investors are offered a high yield, but in return you risk losing money if an outbreak occurs.
The aim is for the bond to comprise the equivalent of 26 million Swedish crowns.
An advantage for those who invest may be that the investment is usually completely separate from the rest of the bag.
– So if disaster strikes and investors lose money on the bond, it is rarely at the same time as they lose money on all their other investments as well. And so the loss actually goes to helping people in need, said Lisbeth Stausholm Zacho, an innovative financing advisor for the Danish Red Cross, in a previous interview with Magasinet 360 degrees.
The current bond money can be paid in the event of a catastrophic volcanic eruption at ten named volcanoes, including Ecuador, Indonesia, and Cameroon. Just hours after the ash cloud is released into the air, the funds are released through blockchain technology, according to the Red Cross.
Investors include Plenum, Schroder and Solidum, and the Red Cross has worked with insurance group Howden to develop safety.
Gustav Sjöholm / TT
Ten volcanoes have been identified because of their proximity to vulnerable communities (at least 700,000 people live within a 100-kilometer radius around the volcano), thus putting them at risk of humanitarian disasters in the event of an eruption. The selected volcanoes are Cotopaxi, Tungurahua and Pichincha in Ecuador, Merapi and Raung in Indonesia, Villa Rica in Chile, Nevado del Ruiz in Chile, Fuego in Guatemala, Popocatépetl in Mexico and Mongo ma Mdemi (also known as Cameroon) in Cameroon.
Source: Danish Red Cross
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