Caribbean CCRIF wind policies (and cat bond) not triggered by Gonzalo

by Artemis on October 24, 2014

Initial model runs suggest that Caribbean Catastrophe Risk Insurance Facility (CCRIF) member countries affected by tropical storm and hurricane Gonzalo will not receive a payout, which also means the World Bank – CCRIF 2014-1 catastrophe bond will be safe.

According to the CCRIF, the parametric disaster insurance pooling facility for the Caribbean region, preliminary runs of the facilities loss model indicate that none of the tropical cyclone policies for the countries affected by Gonzalo have triggered, therefore no payout is due to them.

Gonzalo affected four CCRIF member countries, Anguilla, Antigua and Barbuda, Bermuda and St. Kitts and Nevis. Each of these four countries experienced winds of tropical storm force or above, resulting in the need for the CCRIF to produce an event report, called a Multi-Peril Risk Estimation System (MPRES) report, under the facilities loss calculation model.

The CCRIF’s model produced a wind footprint, which shows wind speeds aligned with the NHC estimates. The CCRIF models shows that maximum wind speeds that impacted Bermuda were in the 110-115 mph band; 85-90 mph in Anguilla and 60-65 mph in St. Kitts and Nevis and Antigua and Barbuda.

Despite the seemingly severe nature of Gonzalo, none of the policies have been triggered, according to the CCRIF. The member countries select their own terms for coverage levels and attachment points at the time of purchasing policies from the CCRIF and in the case of Gonzalo, while a major storm, the coverage for the affected countries has been designed to respond to impacts from even more severe storm it seems.

The CCRIF explained; “Modelled losses and any subsequent payouts are based on the conditions of the countries’ policies and their risk profiles. Preliminary runs of the CCRIF loss model generated government losses due to wind damage under the conditions of the Tropical Cyclone policies of the four affected countries but these losses were below the policy attachment point of each country and therefore no payout is due.”

With the CCRIF tropical cyclone wind member policies not being triggered by Gonzalo, it means that the $30m World Bank – CCRIF 2014-1 catastrophe bond, issued in June, will also be safe. The CCRIF’s first cat bond features a parametric trigger which utilises the same loss model as the underlying policies, covering tropical cyclones and earthquakes, so won’t be affected by Gonzalo.

Anguilla and St. Kitts & Nevis are both countries which bought CCRIF excess rainfall policies, so there is the potential for them to receive a payout from that policy if the rainfall levels experienced were high enough to breach the parametric triggers. We will update you if we hear any further details on that eventuality.

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