By: Staff Writer
April 15, 2025
The Caribbean Policy Development Centre (CPDC) in a new report said that the Climate and Disaster Risk Finance and Insurance (CDRFI) in the Caribbean should be used as an instrument to reduce financial burden.
The report said based on the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC), “there is a need to expand solutions, especially at a micro and individual level. Certainly, Climate and Disaster Risk Finance and Insurance (CDRFI) approaches are essential for combating climate vulnerabilities and external shocks, especially within the Caribbean. These solutions can be tailored to mobilise finance to help build the resilience of vulnerable groups in Caribbean nations, including Antigua and Barbuda, Barbados, the Commonwealth of Dominica, Grenada, and Jamaica.”
The report also said: “From a micro perspective, people in the Caribbean are also vulnerable to climate change. Climate change and extreme weather events disproportionately burden vulnerable groups in the Caribbean.
“For instance, unexpected flooding caused by changed precipitation can significantly impact the elderly, and farmers in multifaceted ways. The elderly, often are more vulnerable due to decreased mobility and health issues, face heightened risks of injury, and displacement. Additionally, farmers, reliant on predictable weather patterns for agriculture, may suer substantial crop losses, financial setbacks, and food insecurity, further perpetuating cycles of poverty and economic instability. Certain demographic groups are also disproportionately affected by climate change.
“Solutions have been introduced in the Caribbean region at the macro level. For instance, following Hurricane Ivan’s devastation in 2004, the Caribbean Community (CARICOM) Heads of Government sought assistance from the World Bank +to create a risk financing mechanism that could offer support to member governments and provide rapid financial relief in the aftermath of disasters. This initiative marked the inception of what would later become the CCRIF.”
It also said: “Insurance functions as a tool to shift financial risk from a risk-averse entity to another willing to assume it.
Insurance which targets events such as natural disasters or adverse weather events is referred to as disaster insurance, catastrophe insurance, or weather insurance. Disaster insurance specifically mitigates post-disaster financial risks resulting from natural disasters. Essentially, it embodies an agreement whereby one party, called the insurer, is willing to accept the financial risk associated with a natural disaster of another party, called the policyholder.
“The policyholder pays the insurer a fee, called a premium, in exchange for the insurer accepting the risk. If a natural disaster occurs, the insurer is required to pay the policyholder a sum called the payout. If the natural disaster does not occur, then the insurer will profit since it will not be liable to pay any payouts to unaffected policyholders.”
It added: “In recent times, parametric insurance has emerged as one of the new insurance products offering quick financial liquidity. Parametric insurance refers to insurance where the claim is based on climatic events that cause the loss, rather than the loss itself.
“The event which causes the loss is referred to as the named peril. Parametric insurance may be offered against a named peril, or against multiple named perils. Common perils used in parametric insurance include excess rain and excess wind. Excess rain or wind is often measured by time series data or an index on the time series data.”