All sixteen member governments of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) have renewed their hurricane and earthquake parametric insurance coverage for the 2013/2014 policy year which began on the 1st June. All members benefit from a premium discount for the upcoming policy year.
The CCRIF is a catastrophe risk pooling facility which provides parametric based disaster insurance cover to Caribbean countries. Its core products are hurricane and earthquake cover and it has now added the option of additional excess rainfall cover for the current policy year.
Because of budgetary constraints that Caribbean governments are currently under, as they grapple with the fall-out of wider global financial issues, the CCRIF sought ways to minimise premium costs for the governments this year. As a result, the CCRIF provided a 25% discount to all members, as there were no payouts made in the prior year.
Countries were also allowed to apply some of their Participation fee (a deposit they paid when they joined the CCRIF) toward their premiums to lower them even further. They also had the option to lower their attachment point for the policies for tropical cyclones and hurricanes, from a fifteen-year return-period down to a ten-year return-period.
With all these additional options and the discount at members disposal, every member country reduced its costs by at least 25%, with some reducing costs by as much as 50%.
A factor in this cost reduction may well have been the wider reductions in catastrophe reinsurance costs which likely enabled the CCRIF to obtain reinsurance coverage for the facility at a reduced rate, which would have allowed it pass on some savings to members.
The long-awaited excess rainfall product was also added for the 2013/2014 policy year, to provide cover for extreme rainfall events both from cyclones and non-cyclonic, as the hurricane coverage does not include rainfall damage. The rainfall product had been attracting a lot of interest, with countries having suffered significant economic damages from tropical rainfall events which did not trigger the CCRIF coverage. The CCRIF did not say in its press release whether its member countries have taken up the option of excess rainfall protection.
Since its launch in 2007, the CCRIF has made eight payouts to members who suffered catastrophe events, totalling over US$32 million to seven governments on their hurricane or earthquake policies. All of the payouts were transferred to the respective governments within 14 days after each event, demonstrating the benefits of a parametric trigger allowing payouts to be quickly calculated in a facility such as this. Three payouts have been for earthquakes, in Dominica, St Lucia and Haiti, while five have been for tropical cyclones, in the Turks & Caicos Islands, Anguilla, Barbados, St Lucia and St Vincent & the Grenadines.