The Government of Belize has received a payout of $261,073 from parametric insurance coverage provided by the CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility), after torrential rainfall caused by hurricane Earl.
Demonstrating the value of a parametric insurance policy and sticking to its stated commitment, the CCRIF SPC paid out to Belize within two weeks of the event occurring.
The CCRIF is a parametric risk pool, providing tropical cyclone, earthquake and excess rainfall coverage to countries in the Caribbean and Central American region. Backed by reinsurance capital and a cat bond, the parametric insurance facility has been called on a number of times to make payouts since its launch.
Belize is one of the Caribbean and Central American nations covered for torrential rains by the CCRIF, after the country purchased an excess rainfall policy for the first time for the 2016/17 policy year.
The rainfall from hurricane Earl hit Belize on the 4th and 5th of August, causing widespread flooding, damage to homes and businesses, interruptions of water and electricity services and losses to the tourism and agriculture industries.
The CCRIF SPC explained that using a modelled “Rainfall Index Loss” it determined that the level of Hurricane Earl’s rainfall was greater than the country’s excess rainfall policy attachment point and therefore the policy was triggered and a payout of $261,073 was due.
CCRIF CEO Isaac Anthony commented; “The CCRIF Board and Team are relieved that there was no loss of life – and we hope that the funds received from CCRIF will be useful to the Government of Belize in their recovery efforts. We wish the Government and people of Belize a rapid recovery.”
Belize also has a tropical cyclone and hurricane policy under the CCRIF SPC program, but the CCRIF found that modelled losses caused by wind and storm surge from Hurricane Earl were below the policy attachment point as selected by the Government and so this policy was not triggered.
The excess rainfall policy provides complementary protection to tropical cyclone cover, enabling Belize to be protected against both wind and rain events that often occur at the same time during tropical cyclones.
With parametric insurance policies paying out based on the intensity or severity of a catastrophe or weather event, they provide valuable, rapid paying cover to countries such as Belize. With no on the ground claims assessment required, the CCRIF SPC can quickly establish whether a payout is due and disburse money to countries fast enough to be useful for disaster recovery.
For the 2016/17 policy year CCRIF sold 15 tropical cyclone policies, 11 excess rainfall policies and 13 earthquake policies to its risk pool of 17 members across the Caribbean and Central America. The risk is ceded to the global reinsurance and capital markets, including through a $30m catastrophe bond issuance from 2014, World Bank – CCRIF 2014-1.
The excess rainfall policy was first introduced in 2013. The CCRIF now targets launching a parametric drought insurance policy in 2017, which will further expand the amount and diversity of risks within its risk pool.
Global reinsurance capacity is key to the CCRIF and its members, underpinning its policies and providing efficient risk capital to protect against large payouts being required.