The World Bank supported Pacific Catastrophe Risk Insurance Company (PCRIC), a parametric disaster and catastrophe insurance captive insurer for the Pacific Island Countries (PIC’s), has renewed its reinsurance protection, growing the risk pool by 18% to $45 million, with the backing of four major reinsurers.
Previously known just as the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) but now formalised as the captive insurer Pacific Catastrophe Risk Insurance Company (PCRIC) owned by the Pacific Catastrophe Risk Insurance Foundation (PCRIF), the facility provides risk pooling for PIC’s, helping them to secure insurance coverage against tropical cyclones, earthquakes and tsunamis by providing the interface to the global reinsurance markets.
Much like the Caribbean facility, the CCRIF SPC, the PCRIC offers a way to make the cost of disaster insurance more affordable for the PIC’s, while the parametric triggers used mean payouts can be made quickly when disaster strikes, with policies designed to provide member countries with liquidity within ten days of an event occurring.
The same five countries are involved in the facility, Cook Islands, Marshall Islands, Tonga, Samoa and Vanuatu, for what will be its sixth year.
Benefiting from sovereign parametric catastrophe insurance helps the governments have some certainty that when major disaster strike there is a source of insurance protection that can payout the necessary emergency recovery funding rapidly. In many cases parametric insurance payouts can be made long before any aid funding makes its way into disaster hit countries.
For the reinsurance renewal PCRIC worked with Willis Re in Australia as its broker and Willis Towers Watson in New Zealand as its insurance manager.
The season for this renewal runs from 1st November 2017 through to October 31st 2018, alongside the Pacific cyclone season, and PCRIC purchased $45 million of reinsurance from four global companies, AXA, Hannover Re, Liberty and Mitsui Sumitomo.
Donations from Germany, the U.S., UK and the assistance from the World Bank helped the PCRIC to upsize on its reinsurance protection, enabling it to expand the parametric insurance coverage afforded to the five Pacific island nations.
The CCRIF provided an example of the benefits that such parametric insurance facilities have for the sovereign governments they protect, paying out a significant sum for the 2017 hurricane season.
As this Pacific catastrophe insurance facility continues to grow and the size of the parametric risk pool underpinning it increases, its use of reinsurance capital will increase and the capital markets may find a chance to play a role in supporting its further growth with efficient risk capital.
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