Posted: Tuesday, June 15, 2021. 8:27 am CST.
By Aaron Humes: Much like some of us do personally, countries of the Caribbean and Central America have renewed coverage of insurance for tropical cyclones, excess rainfall, earthquakes, and the fisheries sector at a cost of US$1 billion with the regional insurance company Caribbean Catastrophe Risk Insurance Facility (CCRIF), based in the Cayman Islands.
CCRIF offers five parametric insurance products to 23 members: 19 Caribbean governments, three Central American governments including Belize and one electric utility company based in Anguilla.
The company offered assurances that with the ongoing effects of the pandemic and the heavy risk of a natural disaster impeding their economic recovery, they are covered for another year against tropical cyclones and excess rainfall events (which can occur during a hurricane or tropical storm or any rain system throughout the year) – as well as earthquakes that may occur at any time.
CCRIF’s CEO, Isaac Anthony, in commenting on the renewals said, “CCRIF continues to offer insurance products not readily available in traditional insurance markets. These parametric insurance products allow governments to have access to liquidity within 14 days of an event. This is key as it helps governments reduce budget volatility after a natural disaster, support the most vulnerable in their population and begin the process of recovery in short order.”
CCRIF is supported by grants from the European Union and the Government of Canada, the former to the tune of US$12 million in 2020 and US$317,000 in 2021; while the Canadians delivered US$12.4 million the Canada-CARICOM Climate Adaptation Fund in support of nine countries including seven current CCRIF members, Belize among them. These countries used their allocation to cover a portion of their premium costs for their CCRIF parametric insurance policies for policy year 2020/21 and/or 2021/22. Two other countries – Guyana and Suriname – which are not yet members of CCRIF – would be able to use their allocations towards their participation fees as well as for premium support when they join the Facility.
For Central American members including Belize, CCRIF paid out benefits totaling US$11 million including a reduction in premium costs on their parametric insurance policies and/or an increase in CCRIF coverage. This effort was supported by the Multi-Donor Trust Fund (MDTF) of the Catastrophe Risk Insurance Program of Central America and the Caribbean, administered by the World Bank.
During the 2020 hurricane season, CCRIF made 8 payouts due to tropical cyclones Cristobal, Laura, Zeta, Eta and Iota totalling US$48 million to 6 member governments on their tropical cyclone and/or excess rainfall policies. Since the Facility’s inception in 2007, it has made a total of 50 payouts to 16 of its member governments, totalling approximately US$200 million – all within 14 days of the event.
CCRIF was formed as the ﬁrst multi-country risk pool in the world and was the ﬁrst insurance instrument to successfully develop parametric insurance policies for natural catastrophes. The Facility is a working example of an effective 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.
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