By: Staff Writer
September, 2022
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) says that the Turks and Caicos Islands (TCI) may get a payout for Hurricane Fiona depending on the level of insurance they got
CCRIF, in an emailed response to Caribbean Magazine Plus’s queries about the status of the TCI and the Dominican Republic with regard to any insurance payouts for damage caused by Hurricane Fiona said that the TCI is covered under CCRIF and if their policy is triggered for a tropical cyclone or excess rainfall event they will become eligible for a payout.
In the oncoming days we will know more, but for now at least the TCI is covered by the CCRIF, but they made no mention about the Dominican Republic, which suffered excess flooding with regard to Fiona.
All of the English speaking Caribbean nations are members of the CRIF including Bermuda. In addition, Panama, Guatemala and Nicaragua are members of the CCRIF along with Haiti and Sint Maarten, all of whom English is not their first language and for the first three, they are Central American countries. So, it is curious as to why the Dominican Republic has not signed onto the CCRIF when it appears as if they would be more than welcomed to join.
But for Hurricane Fiona, the parametric insurance coverage was updated in 2019 to use the SPHERA model (System for Probabilistic Hazard Evaluation and Risk Assessment).
The CCRIF tropical cyclone insurance product is based on a probabilistic assessment of the risk of events and induced losses including near real-time estimates of damages to infrastructure due to wind speed and storm surge. A combination of exposure, hazard, vulnerability, and loss modules are used to create the final insurance policy including attachment and exhaustion points used for pricing and payouts. So an assessment would have to be made for the TCI using this measure and it is not automatic.
CCRIF also said with regard to other nature events like what happened in St Vincent and the Grenadines with the La Soufriere volcanic eruption in 2021, “CCRIF does not provide coverage for volcanic eruptions. However CCRIF provided financial support in the form of a grant of US$2,209,000 to the Government of St. Vincent and the Grenadines following the eruption.
“Additionally, CCRIF provided a grant in the amount of US$17,000 to the UWI Seismic Research Centre (SRC), to purchase new communication and ground deformation equipment to be added to those already deployed in St. Vincent, increasing the SRC’s capacity to understand the volcano’s eruptive processes and to better monitor it and be able to provide advanced warning of hazardous activity.”
Whether or not the CCRIF has value for the Caribbean depends on where one sits with regard to CCRIF’s past interventions. CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) describes itself as a “regional catastrophe fund for Caribbean and Central American governments to limit the financial impact of devastating hurricanes, earthquakes and excess rainfall events by quickly providing quick financial liquidity when a policy is triggered. It established in 2007 as the world’s first multi-country, multi-peril, risk pool based on parametric insurance. The Facility also provides coverage for the fisheries sector and electric utilities.
“It operates as a development insurance company as the products and services that it provides are for the benefit of members and surpluses made go back to the members, through reduced costs of premiums and by developing technical assistance programmes in the areas of disaster risk management and climate change adaptation for member countries to enhance their resilience.”
The email also said: “CCRIF is designed as a captive insurance company because it provides insurance products, which attract risks that are priced too high by the traditional markets. The Facility therefore provides a bespoke insurance solution that enables it to provide unique and tailored insurance/coverage that is not readily available in the commercial market. Another advantage of CCRIF as a captive is that the Facility is able to achieve lower premiums by retaining a portion of the risk while maintaining a claims-paying capacity that is better than the industry average.
“Today, CCRIF has 23 members – 7 more than the original 16 governments that joined in 2007 – 3 from Central America and 19 from the Caribbean and 1 electric utility company.
CCRIF has demonstrated that catastrophe risk insurance can effectively provide a level of financial protection for countries vulnerable to natural disasters.
“The selection of a parametric insurance instrument as a basis for CCRIF policies was largely driven by the fact that parametric insurance is generally less expensive than an equivalent traditional indemnity insurance product as it does not require a loss assessment procedure after a disaster, allowing for claims to be settled quickly and in the case of CCRIF, payments are made within 14 days of the event. This is an important feature considering the urgent need for liquidity by governments after a catastrophe to support the most vulnerable in the population, communities and infrastructure.
“CCRIF offers 5 parametric insurance products – for tropical cyclones (based on wind and storm surge), earthquakes, excess rainfall (based on rainfall) and for the fisheries sector and electric utilities for transmission and distribution.
“Since its inception in 2007, CCRIF has made 54 payouts totalling US$245M to 16 member governments. It is important to note CCRIF was never set up to cover all the losses on the ground. So, while these payouts are relatively small compared to the overwhelming cost of rebuilding, all recipient governments have expressed appreciation for the rapid infusion of liquidity, which they are able to use to address immediate priorities and to support the vulnerable.”
CCRIF assessments have revealed that payouts have benefitted over 3.5M persons in the Caribbean and Central America. Most of CCRIF payouts – more than 60 per cent has been used by governments to address immediate needs post disaster – from providing food, water and medicines to clearing roads; but payouts have also been used for repairing critical infrastructure such as schools, supporting the tourism sector post disaster so that the country does not miss the upcoming tourist season while hotels await payouts from their indemnity insurance, to supporting the agriculture sector etc.
CCRIF members purchased US$1.2 billion in coverage for catastrophe risk insurance for 2022/23 against climate-related and seismic hazards. Members increased coverage by 10 percent over the previous year – demonstrating the value they place on CCRIF insurance.
CCRIF is working with countries to roll out the COAST insurance policy for the fisheries sector to other countries beyond the current two pilot countries, Saint Lucia and Grenada. Also, CCRIF is working with CARILEC and electric utilities in the region to roll out the electric utilities product which provides coverage for the Transmission and Distribution (T&D) infrastructure against tropical cyclone induced wind. T&D is not generally covered by regular indemnity insurance. However, as a bespoke insurance solution CCRIF is able to provide coverage for T&D especially since self-insurance for T&D is unsustainable.
CCRIF is working on the development of new products for drought, flooding (rainfall runoff), agriculture, the water sector and housing. The Facility also is working with the Munich Climate Insurance Initiative, ILO Impact Insurance and Guardian General Insurance to roll out a microinsurance product to support vulnerable groups such as farmers, fisherfolk, seasonal workers, street vendors, taxi drivers etc. in 5 pilot countries: Jamaica, Grenada, Saint Lucia, Belize and Trinidad & Tobago.
Further, CCRIF’s technical assistance programme is working with young persons to build capacity in areas related to disaster risk management, meteorology, etc. and we do provide scholarships and internships as we seek to build a cadre of disaster risk managers across the Caribbean. CCRIF has provided 165 scholarships to Caribbean nationals totalling US$1.81M since 2010 to develop the next generation of leaders in disaster risk finance, disaster management, climate change adaptation, meteorology, environmental management and civil/environmental engineering. CCRIF has placed 152 interns at 32 national and regional organizations since 2015, with a total investment of about US$420,000.