Caribbean catastrophe risk alternative emerges

by Artemis on April 23, 2008

Since I posted on the 9th April about the Caribbean Catastrophe Risk Insurance Facility news has been released that an alternative is emerging. In that post I discussed the concerns of locals that the CCRIF was not providing the cover they really needed and that payouts were too low after last years hurricane season. Now an alternative exists which also transfers their risks to the capital markets.

The news concerns Belmont Risk Solutions, a British Virgin Islands based specialty (re)insurance broker and risk consultancy firm, who have announced the launch of a new product, the Caribbean Government Insurance Bond (CGIB) that will offer Caribbean governments an alternative to the World Bank’s Caribbean Catastrophe Risk Insurance Facility.

Belmont’s managing director, Simon Owen, confirmed that they had been working closely with a major investment bank to offer a highly-liquid and transparent catastrophe bond, designed to offer protection to both governments and private stakeholders in the event of a significant natural disaster. They further advised that they had received considerable interest from number of Caribbean governments, some of whom were CCRIF participants.

Owen said “Our product is designed to offer a similar level of liquidity, but does not contain the complex layers of parametric triggers associated with the CCRIF. It has been specifically structured to include simple, easily identifiable triggers that will allow for significant payments within three business days of the requirements being met. Whilst the level of damage inflicted by natural disasters can be devastating, the detrimental effect of a resulting economic downturn can be even greater in the long-term. The CGIB creates the ability for both public sectors and private stakeholders to access the protection, meaning the related payments will help repair the country’s infrastructure and provide local businesses with valuable cash-flow to ensure the economy is not disasterously affected. It can also provide aggregate-exposed local insurers
with access to liquid capacity that is not available in the traditional reinsurance market.”

Owen also advised that Belmont was also in the process of finalising other non-traditional products that will offer protection to industries and companies with significant catastrophe exposures in the region.

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