The CCRIF SPC, formerly known as the Caribbean Catastrophe Risk Insurance Facility, has received fresh backing from the World Bank and the European Commission to help to broaden the access to its parametric insurance products across Central America and the Dominican Republic.
The European Commission and the World Bank signed a EUR14 million agreement to be executed by the Multi-Donor Trust Fund (MDTF), to support increasing access to low-cost, high quality parametric disaster and weather risk insurance for countries in the region.
The backing is targeted at supporting the entry of Central American countries and the Dominican Republic to the CCRIF SPC group of covered countries. CCRIF SPC currently has 17 members who all receive access to disaster insurance, while CCRIF SPC pools the risk and hedges it with the traditional reinsurance market and capital markets investors.
The agreement was signed by Neven Mimica, European Union Commissioner for International Cooperation and Development, and Jorge Familiar, World Bank Vice President for Latin America and the Caribbean. Milo Pearson, Chairman of CCRIF SPC. Ivan Acosta, Minister of Finance and Public Credit of Nicaragua, and Wilfredo Cerrato, Finance Secretary of Honduras, also took part in the signing ceremony.
“The European Union’s contribution to this Multi-Donor Trust Fund for Central America countries and the Dominican Republic is a reflection of our shared concern for the need to support partner countries towards building resilience to disasters and climate change; a concern that has led to an increase in funding for climate change in the EU’s development priorities,” Mimica explained. “The urgency of the situation calls for action now, which is why we are particularly pleased to be able to make this announcement today.”
“For small economies, tackling climate and disaster risks effectively requires efforts at the regional level, since effective solutions call for risk pooling. This is critical for Caribbean and Central American countries that are increasingly vulnerable to the effects of climate change,” Familiar added. “The Facility is a good example of a regional public good where member countries will be able to benefit from insurance coverage at a more affordable rate.”
The engagement is “part of renewed efforts from donors and the international community to address increasing global climate and disaster risks,” the announcement said.
As well as the EU contribution, the governments of Canada and the United States also have pledged funds to the MDTF, totaling approximately US$24 million to date in support of COSEFIN countries’ participation in CCRIF SPC.
These donations help to make accessing CCRIF SPC more affordable for its members, reducing membership costs and ensuring that the parametric disaster insurance is available at affordable rates.
With 17 members already and more seemingly to come, the risk pool at the CCRIF SPC will grow further resulting in an increased need for reinsurance protection. That could result in greater opportunities for the ILS markets to take a share, perhaps also resulting in another and larger CCRIF SPC sponsored catastrophe bond.
With parametric insurance at its core, CCRIF can make rapid payouts to members, enabling them to better recover from disaster with a source of liquidity. Since 2007, CCRIF has made 13 payouts totaling approximately US$38 million to eight members. All of these payouts have been made within two weeks after each event.