By: Kimberly Ramkhalawan
August 5, 2022
Some US$1.2bn in catastrophe insurance has been purchased by Caribbean nations against climate and seismic related disasters, representing an increase of 10 percent over the previous year.
Providing the coverage, the Caribbean Catastrophe Risk Insurance Facility, CCRIF, said the sum was purchased by member governments for the policy year 2022/2023.
The member states renewed their parametric insurance coverage for tropical cyclones, excess rainfall and earthquakes, and the fisheries sector commencing June 1, this year.
Within the last policy year, three payouts to member countries, with US$40m given to the Government of Haiti after the earthquake in August 2021, and payouts to Barbados after Tropical Cyclone Elsa and Trinidad and Tobago following heavy rains in August 2021.
CCRIF says these payouts have been swift, demonstrating its commitment to addressing pressing regional needs and support to vulnerable communities.
Haiti is reported to be the largest payout to Haiti represents the largest payout that by CCRIF has made since its inception in 2007. At the fund’s start in 2007, the Facility made a total of 54 payouts to 16 of its member governments, totaling approximately US$245m, all paid within 14 days of the event. Based on the assessment of the use of payouts, these funds have supported over 3.5m people in the Caribbean and Central America and also have been used to support the rehabilitation of critical infrastructure. CCRIF says countries can purchase policies with coverage up to US$150m per peril, although it admits that “the limited fiscal space of countries continues to constrain their ability to do so and many are not able to purchase optimal coverage consistent with the risk profiles of their countries, even with current discounts”.
CCRIF adds that is continues to work with development partners to explore opportunities to support its members to retain and increase coverage. The World Bank, in partnership with the European Union (EU) through its Caribbean Regional Resilience Building Facility (CRRB) managed by the Global Facility for Disaster Reduction and Recovery, is said to have made available additional grant funding to CCRIF SPC to support eligible Caribbean countries.
As a result of this CCRIF says it was able to offer its members the option to reduce the cost of their policy premiums or to increase coverage or both by approximately 11 per cent for tropical cyclone policies and 24 per cent for excess rainfall policies for the Caribbean and 15 to 30 per cent to Central American members.
In 2021, Trinidad and Tobago got a payout worth US$2.4m (TT$16.14m) after the bad weather which occurred between August 18 and 20 of that year. Its government purchased two separate CCRIF policies for excess rainfall – one for Trinidad and one for Tobago – due to different hazard risk profiles for each of the islands.
What does Parametric insurance mean? According to what is provided by CCRIF, its described as a disaster risk financing instruments available to governments to financially protect themselves following natural disasters. CCRIF’s parametric insurance was specifically designed to cover high intensity, low frequency events and to provide quick liquidity within 14 days of an event if a policy is triggered. CCRIF insurance fills the liquidity gap that space that lies between a country’s access to short-term supplies immediately following a natural disaster and before long-term reconstruction and redevelopment assistance begins. This really means that CCRIF was not designed to cover all losses on the ground but to provide countries with a quick injection of monetary resources to meet immediate needs of a country and support the most vulnerable.
It adds while international discussions on post-COVID sustainable recovery call for investment on small island developing states (SIDS) that can aid in disaster risk financing solutions with governments encouraged to utilize similar parametric insurance, however in collaboration with partners in the public and private sectors, other types of insurance mechanisms for vulnerable groups.
As a result, it says it is “currently leading the transition phase of the Climate Risk Adaptation and Insurance in the Caribbean (CRAIC) Project and working alongside the Munich Climate Insurance Initiative, ILO Impact Insurance, and Guardian General Insurance Ltd. to increase access to the Livelihood Protection Policy (LPP)”.
Meanwhile, the facility says it will resume its rollout of the COAST product for the fisheries sector, which came to a halt due to the pandemic.
Interestingly, CCRIF says it intends to work with the Caribbean Electric Utility Services Corporation (CARILEC) for the rollout of its electric utilities product.
Only this week following a massive power outage after the freak storm that came with a Tropical wave, Grenada’s Prime Minister Dickon Mitchell says the government is exploring the possibility of having the island’s lone electricity company, GRENLEC, receive insurance coverage for natural hazards under the CCRIF. Grenada is one of the thirteen states that have renewed its coverage this policy year, with its premium after grants set at US$1.5m.
According to the Prime Minister following this week’s post cabinet media briefing, Prime Minister Mitchell his government will engage CCRIF’s CEO Isaac Anthony on matters concerning the island’s risk insurance, when he visits the island in the coming weeks. Mitchell says he intends to focus on Grenada’s sole electricity company, GRENLEC, getting coverage under the government’s premium.
While he says GRENLEC is self-insured, since 1994, it has had to put aside EC$2m each year to fund what is called the hurricane fund, much of which was used to rebuild after 2004’s Hurricane Ivan. And while private insurers have not been able to provide the support which is cover its poles and lines, the transmission and distribution aspect of the company, looking at another option is a must.