The regional risk insurance facility for Caribbean and Central American governments will pay US$19 million to Dominica under the island’s tropical hurricane coverage following the passage of Hurricane Maria on Sept. 19. Whether the insurance instrument will pay an additional sum under an excess rainfall policy that Dominica holds is currently being assessed.
This brings the total CCRIF payouts since the start of the 2017 Atlantic hurricane season to about US$50.7 million.
The other six countries that received payments from the Cayman-based segregated portfolio company are the Turks and Caicos Islands, which received $14.8 million; Antigua and Barbuda ($6.8 million); Anguilla ($6.7 million); St. Kitts and Nevis ($2.3 million); The Bahamas ($397,000); and Haiti ($162,000).
Since its inception in 2007, the risk insurance facility has paid out approximately US$120 million.
The CCRIF, formerly known as the Caribbean Catastrophe Risk Insurance Facility, was designed to provide quick liquidity to governments after the catastrophic impact of tropical cyclones, earthquakes and excess rainfall. In developing countries in the Caribbean and Central America, in particular, governments are forced to divert funds from their budgets and rely on new loans and donations to deal with the aftermath of natural disasters. These funds are typically not available quickly.
CCRIF chief executive Isaac Anthony said, “The injection of short-term liquidity that CCRIF provides when a policy is triggered is not intended to cover all the losses on the ground following a disaster, but is designed to allow governments to reduce their budget volatility and to provide much needed capital for emergency relief such as clearing of debris and other clean-up activities, restoring critical infrastructure, and most importantly providing humanitarian assistance to the affected population, thereby reducing post-disaster resource deficits.”
The annual renewal of policies by member government provides “strong evidence that our model is a benefit to the region as well as a template that can be adopted and adapted by other regions of the world,” Mr. Anthony said.
After Hurricane Ivan, the Caribbean Community (CARICOM) heads of government approached the World Bank for assistance to design and implement a cost-effective risk transfer program for members with a grant from the government of Japan.
Each member pays an annual premium directly related to the amount of risk it transfers to CCRIF and can purchase coverage up to a limit of approximately US$100 million for each insured hazard.
“By pooling the catastrophe risks of our members into a single diversified portfolio, we are able to save our members approximately 50 percent in individual premium payments compared to if they were to purchase identical coverage individually,” Mr. Anthony said.
The CCRIF was developed under the technical leadership of the World Bank and It was capitalized through contributions to a Multi-Donor Trust Fund (MDTF) by the government of Canada, the European Union, the World Bank, the governments of the U.K. and France, the Caribbean Development Bank and the governments of Ireland and Bermuda, as well as through membership fees paid by participating governments.
Referring to the total payouts of US$120 million since its inception, CCRIF Chairman Milo Pearson stressed that donors have been instrumental to the success of CCRIF by providing support for capitalization for the facility as well as major operating expenditures such as those related to model and new product development. “The role of the international donor community cannot be overemphasized,” he said. “Our development partners have supported the buildout of the facility’s risk bearing capacity assuring its financial sustainability as an independent entity over the long term and above established national benchmarks for catastrophe insurers.”