The CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) is ten years old this year and is it looks to the future the parametric insurance facility wants to better serve its members by scaling up the protection it offers, adding new products, and ultimately expanding the CCRIF risk pool.
CCRIF provides Caribbean and Central American nations with parametric disaster insurance protection, against perils including hurricanes, earthquakes and extreme rainfall.
The risks are structured and underwritten using parametric triggers and the diversified risk pool that is created is then backed by reinsurance from the traditional and sometimes alternative market.
The larger and more diversified the CCRIF risk pool becomes the greater the economies of scale that it can pass on to its policyholder members. So there are benefits to the scaling up beyond just making more coverage, or different parametric risk transfer products available.
Size really does matter when it comes to approaching the global reinsurance and capital markets, meaning the larger the CCRIF risk pool becomes, the greater the efficiencies of global risk capital can be, to the benefit of the members.
At a meeting to celebrate the tenth anniversary and look ahead to the future, key CCRIF members and stakeholders explored the opportunities to scale up the parametric insurance facility.
They discussed various ways to increase scale, including providing more coverage to existing members, adding new members to the risk pool, and offering new products or covering new perils.
In terms of the amount of coverage that is available, currently it’s insufficient to meet larger Caribbean or Central American countries disaster risk transfer and financing needs. Countries such as Jamaica really need tens if not hundreds of millions of dollars in payouts if a truly major hurricane or earthquake struck and the CCRIF policies are currently not supporting that level of coverage.
Adding new members will benefit all the existing ones as well, through the broadening and diversification of the risk pool, as well as through the reinsurance synergies the CCRIF could then achieve.
New products also broaden the risk pool, but more importantly they can meet the needs of a wider range of potential cedents, beyond just the countries themselves.
Product ideas discussed at the CCRIF meeting included drought insurance, cover for industries such as agriculture and fisheries, as well as coverage for public utilities such as power and telecoms, and covers for other industries such as tourism.
The CCRIF could benefit from the use of real-time monitoring stations around the region it covers, for disaster related metrics such as wind-speed, enabling more localised parametric insurance to be offered.
Participants at the CCRIF meeting also discussed how the parametric insurance facility could broaden its research and development capacity, provide in-country support for strengthening national disaster risk management strategies, and using its risk models and expertise to assist country decision-making processes around disaster risk reduction.
CCRIF has also launched an Online Policy Forum as it looks to engage members and stakeholders identifying its path towards the future and how it can better support disaster risk management in the region.
CCRIF CEO, Isaac Anthony commented, “We hope to use the online forum to discuss key topics related to risk financing, provide updates on CCRIF among others and indicated that the Forum will provide a unique space for officials to engage in open and frank discussion and will provide an opportunity to develop solutions to address common challenges in keeping with the spirit of innovation and building a resilient Caribbean.”
Scaling up the CCRIF offering and expanding the parametric risk pool will enable the facility to make greater use of the efficiencies of risk capital, both reinsurance and from the capital markets, also making instruments such as catastrophe bonds more cost-effective and enabling the ILS community to better support CCRIF’s strategic objectives.
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