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10 Mar 26

Blended finance can’t scale without insurance at the table

By Andrew Apampa, CFA
Blended finance can’t scale without insurance at the table

This op-ed was originally published in ImpactAlpha. Written in collaboration with Global Asia Insurance Partnership CEO Min Hung Cheng.

Demand for capital to address climate and development challenges has never been greater, but the market’s ability to attract private investment remains constrained. One reason is that blended finance transactions continue to be structured without the actors who understand risk most deeply: the insurance sector.

Their limited engagement is undermining deal quality and slowing progress. Convergence and the Global Asia Insurance Partnership examined this dynamic in a recent playbook, finding that insurance sector involvement remains minimal even when risk issues sit at the center of transaction design.

This is a missed opportunity for the development community, but also for the insurance sector itself, which stands to gain from deeper partnerships that help close protection gaps and expand their reach in emerging markets.

Insurance sector actors can strengthen blended finance in three distinct ways: as risk advisors, as providers of insurance and reinsurance capacity, and as long-term investors.

Here, we focus on their advisory role because it has the greatest impact on whether deals are bankable and well structured. Yet this is precisely where engagement tends to come too late. The insurance sector is frequently consulted only after financial terms have been drafted and the risk architecture has hardened. By that point, their ability to shape feasibility assessments, improve risk allocation, and ensure insurability is sharply reduced.

This late engagement can raise pricing for insurance solutions, narrow coverage options, and increase uncertainty for commercial participants. It can also force donors to take on risks that could have been borne by the insurance sector. The result is a blended finance system that is more expensive, less effective, and less able to attract private capital at scale.

Recent experience illustrates what happens when insurance expertise is introduced only after a transaction is already advancing. In Nepal, the Upper Trishuli-1 hydropower project, one of the country’s largest inbound foreign direct investments and a significant boost to its future renewable energy production, was waylaid by the 2015 Nepal earthquake.

Challenges in securing insurance to cover earthquake risks then emerged, stalling loan disbursement and threatening the project’s viability. Aon was brought on as a risk advisor and Swiss Re Corporate Solutions as an insurer to design a parametric earthquake insurance solution linked to a site-specific seismic index that triggered payouts when ground shaking exceeded predetermined thresholds, enabling the project to move forward. However, the process would have been smoother and more efficient if those considerations had been built into the initial structure.

Early engagement
This pattern must change. Climate-related hazards are increasing uncertainty for infrastructure development, and gaps in hazard data and modeling remain a significant barrier to insurability in many emerging markets, as our playbook notes.

These constraints make early engagement from the insurance sector more important. The sector’s technical input is needed to identify data gaps, support hazard mapping, and clarify the feasibility of risk-transfer options before transaction structures harden.

When this work is left too late, it becomes far more difficult to incorporate insurability into the design. Early engagement, by contrast, allows the insurance sector to play a more proactive role in shaping solutions that expand protection, build resilience, and open commercially viable markets aligned with its long-term growth strategies.

Donors, governments, development finance institutions (DFIs), and multilateral development banks (MDBs) therefore need to integrate the insurance sector into the earliest phases of transaction development. This means embedding insurance expertise in ideation, feasibility assessment, and early modeling, where decisions about risk allocation and design parameters are made. It also requires stronger coordination between ministries, supervisors, DFIs and MDBs, and insurance partners to ensure that insurability constraints are identified and addressed before a deal advances toward financial close.

Catalytic capital providers can help create the conditions for earlier engagement. Design-stage grants and technical assistance facilities should include dedicated allocations for early risk assessments, climate modeling, and data development, enabling the insurance sector to apply its technical expertise effectively during the structuring process. These allocations are small relative to the cost of redesigns or the additional concessional capital required when insurance considerations surface later. Greater efficiency is also likely when the insurance sector itself develops clearer entry points into transaction development, including predefined triggers and dedicated advisory capacity that can be mobilized when projects reach the appropriate stage.

Blended finance will not reach the scale required to meet climate and development goals without a more deliberate and systematic integration of the insurance sector. These actors bring more than coverage. They bring a long-term perspective on risk, grounded in data and modeling, that is essential for structuring transactions that are credible and investable. The insurance sector’s involvement is not a secondary input. It is foundational to creating effective mechanisms for risk allocation and to reducing the need for costly redesigns or excessive concessionality later in the transaction lifecycle.

About the Author
Andrew Apampa, CFA
Andrew Apampa, CFA

As an Associate Director on the Market Insights team, Andrew is responsible for developing Convergence’s data and research activities, including building out Convergence’s database of historical blended finance transactions and developing blended finance trends analysis and benchmarks. Prior to joining Convergence, Andrew worked at the African Private Equity & Venture Capital Association (AVCA) as a Research Associate. While there, Andrew inaugurated the Special Report series, publishing in-depth studies on thematic issues within African private equity, such as political and currency risk in African PE, and the rise of the private credit industry in Africa. Prior to joining AVCA, Andrew worked at HSBC as an Emerging Markets Equity Strategist, where he published reports focused on investing in frontier equity markets. During his time at HSBC, he also worked on the European Equity Strategy team and the Global Research Marketing team. Prior to his time at HSBC, Andrew was at the University of Cambridge, where he completed his master’s thesis on protest and mobilization in Sub-Saharan Africa. He is a CFA charterholder.

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