The government of the Bahamas has signed back up to parametric insurance coverage from the CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) for the coming hurricane season, but on a restructured basis with the country divided into three regional zones.
The new arrangement, announced by the deputy PM and reported by the Bahamas Tribune, splits the Bahamas into three zones, each with separate parametric triggers, featuring different attachment points and payout factors, to enhance the coverage that the country receives.
The Minister said that the use of three different parametric triggers, for north, south and central regions of the Bahamas, means that payouts can be tailored to provide insurance coverage that is designed based on the amount of infrastructure exposure in each of the parametric zones.
By splitting the Bahamas into these zones the government is hoping that coverage can be more closely aligned with its potential losses from tropical storms and hurricanes, having found that payouts previously had either not emerged, when it felt they should have, or been far below the levels of emergency financing required for disaster response and recovery.
It will also allow the insurance coverage to be targeted on the regions where disaster response is likely to be most important, due to factors such as population and exposure profile.
The CCRIF provides a mechanism by which Caribbean and Central American nations like the Bahamas can access efficient risk financing, thanks to the risk pooling mechanism and access to global reinsurance markets, as well as rapid payouts thanks to the parametric trigger design.
The CCRIF is aiming to expand its parametric product offering, which is only possible with the help of the reinsurance capital that underpins the facility.
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