(CMC) —The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) says its member governments in the Caribbean have all renewed their parametric insurance coverage for tropical cyclone, excess rainfall, earthquake and fisheries in light of the 2020 Atlantic Hurricane Season.
The CCIF said regional governments have ceded more than US$1 billion in risk and increasing overall coverage by eight per cent.
CCRIF SPC is a segregated portfolio company owned, operated and registered in the Caribbean.
It said it limits the financial impact of catastrophic hurricanes, earthquakes and excess rainfall events to Caribbean and Central American governments by quickly providing short-term liquidity when a parametric insurance policy is triggered.
CCRIF SPC said it prides itself in being the world’s first regional fund utilising parametric insurance, “giving member governments the unique opportunity to purchase earthquake, hurricane and excess rainfall catastrophe coverage with lowest-possible pricing”.
To support Caribbean governments whose social and economic sectors have been significantly disrupted by the novel coronavirus (COVID-19), CCIF said in a statement that the European Union (EU), under its Global COVID-19 Response, has provided a grant of €10 million (US$11 million) to CCRIF for premium support or for increasing coverage for its Caribbean members.
CCRIF said this financial assistance is channelled through the EU Regional Resilience Building Facility managed by the Global Facility for Disaster Reduction and Recovery (GFDRR) and the World Bank.
“The renewal of countries’ catastrophe risk insurance policies at this time signals the strategic importance they are placing on disaster risk financing as key to advancing their sustainable development prospects,” it said, adding that “they welcome this additional support provided to them by the EU in the context of shrinking fiscal space.”
CCRIF said that the EU support that is available for each member country would provide at least a 26 per cent discount on total gross premium or an increase in policy coverage under their CCRIF parametric insurance policies.
This is in addition to the discounts that CCRIF also is providing — five per cent discount on gross premium for tropical cyclone coverage, and a further discount of 15 per cent on additional coverage purchased by members for increased tropical cyclone and/or earthquake coverage for the 2020/21 policy year, CCRIF said.
Daniela Tramacere, EU ambassador to Barbados, the Eastern Caribbean States, the subregional Organisation of Eastern Caribbean States (OECS) and the Caribbean Community/CARIFORUM, has reaffirmed “the strong partnership with the Caribbean in these difficult times”.
She said: “Mitigation of COVID-19 impacts ahead of the hurricane season that already started in the region requires extraordinary and coordinated measures.”
“The EU is strongly committed to stand together with its partners in the Caribbean, providing emergency support and participating in the social/economic recovery process. The €1- million support has been provided to CCRIF SPC to ease payment of member countries’ premiums and improve their risk coverage against natural hazards,” she said.
CCRIF said member countries have the option of utilising the EU-funded discount during the 2020/21 and 2021/22 policy years.
It said the decision to allow for use of the funding in 2021/22 is based on projections of low or negative growth in Caribbean countries next year, “which undoubtedly will have an impact on their fiscal space”.
While CCRIF, over the years, has received financial support from as many as 12 bilateral and multilateral development partners, it said this is the first time that support is being provided to all members simultaneously en bloc for premium support.
CCIF said the EU has been one of its development partners from its inception in 2007 having contributed to a multi-donor trust fund that enabled the initial capitalisation of CCRIF.
Again in 2014, CCIF said the EU contributed to the capitalisation and development of new parametric insurance products for current and potential members of CCRIF, and to facilitate the entry of Central American countries and additional Caribbean countries to join the facility.
“I must use this medium to openly thank the European Union for its rapid response in support of our member countries at a time when they are grappling with significantly diminished financial resources due to the economic crisis posed by COVID-19,” said Isaac Anthony, CCRIF’s chief executive officer.
“I also take the opportunity to thank the GFDRR and the World Bank for facilitating this timely assistance to Caribbean countries as part of their wider response to the COVID-19 crisis in the region,” he added.
Since its inception in 2007, CCRIF said it has made 41 payouts, totalling US$152 million, to 13 of its 22 member-governments on their tropical cyclone, earthquake and/or excess rainfall policies – all within 14 days of the event.
The single largest payout made by the facility was US$20.4 million to the Government of Haiti on its tropical cyclone policy following Tropical Storm Matthew in 2016.
Following Hurricane Dorian in The Bahamas last year, CCRIF said the facility made two payouts to the Government, totalling US$12.8 million.
CCRIF said it is working to bring new parametric insurance products to market for drought, the agriculture sector and public utilities with support from the donor community.
CCRIF said it limits the financial impact of natural hazard events to Caribbean and Central American governments by quickly providing short-term liquidity when a policy is triggered.
“As the 2020 Atlantic Hurricane Season begins, Caribbean countries are assured that they are covered for another year – against tropical cyclones as well as excess rainfall events that occur throughout the year and earthquakes that may occur at any time,” said CCRIF, stating that “there is scientific consensus on an above-average Atlantic Hurricane Season this year.”
It noted that the US National Oceanic and Atmosphere Administration (NOAA) is forecasting a likely range of 13 to 19 named storms (with winds of 39 mph or higher), of which six to 10 could become hurricanes (with winds of 74 mph or higher), including three to six major hurricanes (category 3, 4 or 5; with winds of 111 mph or higher).
CCRIF said it also has three members in Central America that have coverage for tropical cyclone, earthquake and excess rainfall.
It said it is “a working example of a disaster risk financing instrument and one of a suite of such instruments available to governments to assist in post-disaster recovery and to help close the protection gap”.
Anthony said: The truth is what we do at CCRIF is about supporting governments to help their populations — communities, businesses and key sectors such as education, agriculture and tourism.
“An assessment of the beneficiaries of CCRIF’s payouts show that over 2.5 million persons in the Caribbean and Central America have benefited directly and/or indirectly from these payouts after a natural disaster,” it said.
CCRIF said it was developed under the technical leadership of the World Bank and with a grant from the Government of Japan.