CCRIF (formerly named the Caribbean Catastrophe Risk Insurance Facility) is set to payout almost $11 million to the Bahamas after hurricane Dorian triggered its parametric tropical cyclone insurance policy.
In a clear demonstration of the efficacy of parametric insurance and reinsurance protection, the CCRIF has already paid 50% of the $11 million total to the Bahamas with the remainder to come within its typical 14 day payout window.
Due to the quick payout this important funding source can be put to work immediately in the Bahamas to assist with its recovery from hurricane Dorian.
The Bahamas has 3 parametric tropical cyclone insurance policies with the CCRIF. Each of these provides coverage for a different area of the archipelago, North West, South East and Central.
Hurricane Dorian’s devastating impacts have triggered the North West Zone parametric insurance policy, which includes the Abaco Islands and Grand Bahama.
The CCRIF said that it might also provide further support through its corporate social responsibility or technical assistance (TA) program to the Bahamas and will work with the government there to to decide on possible grant support that can be given.
Isaac Anthony, CEO of the CCRIF, commented that, “Member governments are appreciative of this rapid infusion of quick liquidity through CCRIF payouts from its parametric insurance policies, which they are able to use to address immediate priorities and to support the most vulnerable in their population.”
Adding, “CCRIF and the parametric insurance products that it provides – is an example of a disaster risk financing tool that is most applicable for high impact low frequency events; and the instrument is designed to allow member governments to reduce their budget volatility and to provide some amount of financial resources for emergency relief such as restoring critical infrastructure and providing assistance to the affected population, thereby assisting to reduce post-disaster resource deficits.”
CCRIF can only make these payouts so rapidly thanks to the use of parametric triggers and the way it is structured a a risk pool, leveraging global reinsurance capital for its necessary financial support.
By establishing a disaster insurance policy that pays out based on the actual parameters or measurements connected to the specific peril it is covering, the protection can be tailored to better meet a government’s budgetary needs. The size of the parametric policies and coverage they provide is down to the government’s premium payments.
“What we do is really about supporting governments to help their populations – communities, businesses and key sectors such as education, agriculture etc. A rough assessment of the beneficiaries of these payouts show that over 2.5 million persons in the Caribbean and Central America have benefitted directly or indirectly from these payouts after a disaster,” Anthony explained.
The payout will be welcome, albeit small by comparison to the overall impacts the Bahamas has felt and the devastation wrought on property, lives and livelihoods.
The insurance and reinsurance industry is facing a loss estimated at up to $3 billion, but the economic impact to the Bahamas will be significantly higher.
Parametric disaster insurance and risk transfer can at least begin injecting funds into disaster zones much more rapidly than more traditional aid and donations, enabling capital to be put to work quickly to help those most in need.