Parametric Catastrophe Relief Funding via Special Purpose Entity
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Solution Overview
Problem
Conventional disaster recovery methods, such as insurance, are often too expensive or unavailable for developing and catastrophe-prone regions, and charitable organizations face challenges in securing funding for disaster relief before catastrophic events occur.
Innovation Solution
A computer-implemented method and system that establishes a special purpose entity offering a financial product linked to charitable organizations, where investors provide capital and donors pay premiums, triggering payments to charities upon occurrence of defined catastrophic events, with payment conditions based on parametric indices of event severity.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If conventional insurance is used for disaster recovery, then financial protection is provided, but the cost becomes too expensive or unavailable for developing and catastrophe-prone regions
Solution Approach 1:
The patent segments the traditional insurance model into a multi-stakeholder structure involving donors, charities, and investors. Each party contributes different resources (donations, expertise, capital) that are pooled together to create a specialized catastrophe relief fund, making the protection more affordable for developing regions while maintaining reliability through diversified funding sources
Solution Approach 2:
The patent introduces a special purpose vehicle (SPV) as an intermediary entity that manages the catastrophe relief fund. This intermediary structure professionalizes the funding mechanism, attracting institutional investors and providing structured financial products while insulating the charitable mission from market fluctuations, thereby improving both reliability and affordability
2Quantity of substance
If charitable organizations solicit funds during disasters, then relief funding is obtained, but the strain of soliciting funds increases during crises
Solution Approach 1:
The patent implements preliminary action by establishing the catastrophe relief fund and securing investor capital before disasters occur. The SPV structure and financial products are set up in advance, creating a pre-funded mechanism that automatically activates upon catastrophic events, eliminating the need for emergency fund solicitation and reducing both time loss and solicitation strain on charities
Solution Approach 2:
The patent enables the system to serve itself by creating a self-sustaining financial mechanism where investor returns and charity donations continuously replenish the fund. This self-service structure automatically generates relief funding without requiring external solicitation during crises, as the system maintains its own capital pool through structured financial returns and ongoing donations
Data Source
AI summary
A special purpose entity offers a financial product linked to a charitable organization. A monetary donation is made to the charitable organization for paying a premium assigned to the financial product. Capital payments are received from one or more investors for the financial product. The premium is paid by the special purpose entity to the investors. Upon occurrence of a catastrophic event assigned to the financial product, the capital is paid from the special purpose entity to the charitable organization, for funding relief efforts for the catastrophic event. Otherwise, the capital is repaid from the special purpose entity to the investors. Charities and donors can prepare a country for natural and man-made disasters by putting in place funding before a catastrophic event actually occurs.