All Caribbean members of the CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) have elected to renew their parametric disaster insurance coverage under the Facility, with a number also expanding their protection, resulting in further growth of the CCRIF risk pool.
At the June 1st renewals, all Caribbean government participants chose their parametric insurance coverage options for 2019/20 and nine of them increased their level of protection for at least one of their policies, while one country added a second peril cover for tropical cyclone risks.
This has helped the CCRIF parametric risk pool expand further again, which will mean greater efficiencies when approaching the reinsurance market for its own protection and this will have been important at the 2019 renewals with rates having risen for Caribbean wind risks.
Members benefit from options for parametric policies covering tropical cyclone, excess rainfall and earthquake risks currently, with these coverages available to Caribbean and Central American governments currently.
Further expansion of the CCRIF parametric risk pool has also come through the addition of coverage options, that make the parametric protection even more user friendly.
CCRIF has provided all of its members with two policy features, an Aggregate Deductible Cover (ADC) and Reinstatement of Sum Insured Cover (RSIC), at no additional cost for 2019/20.
Applicable to tropical cyclone and earthquake covers only, these features were first made available in 2017, with the ADC providing a minimum payment for events that do not breach the parametric trigger, while the RSIC enables coverage to be accessed even after its been fully eroded by a previous loss event, helping to ensure a country is not exposed throughout the remainder of the annual risk period.
For 2019/20 the parametric tropical cyclone and earthquake policies are based on a new catastrophe risk model, called SPHERA (System for Probabilistic Hazard Evaluation and Risk Assessment).
SPHERA features new and up-to-date ground motion, wind and storm surge risk models; a larger,more detailed stochastic event catalogue; a more detailed exposure database that now includes infrastructure and facilities; and new, updated vulnerability functions.
In addition, the excess rainfall risk model has been updated for 2019/20 to XSR 2.5, with new features that reduce basis risk and improve modelled results.
CCRIF said that it is pleased that some of its member governments have increased their coverage this year, explaining the importance of increasing the parametric protection to ensure greater resilience to disaster impacts.
CCRIF’s strategy is to scale up its risk pool to add efficiency for members, given the approach to the reinsurance market for protection becomes increasingly economically effective.
With now 21 members, 19 in the Caribbean and 2 in Central America, a growing product range and plans to add new parametric products for drought, fisheries and aquaculture, as well as new products in development for agriculture and public utilities, the CCRIF risk pool could expand dramatically in the coming years.
The parametric drought, fisheries and aquaculture insurance products will be made available to select countries in 2019/20, the CCRIF explained.
This will again add to the risk pool, with new sources of risk that help to expand it and make it increasingly diverse as well, all of which will add further reinsurance efficiencies at future renewals for the CCRIF. Scale is important for the effectiveness of the CCRIF and these reinsurance efficiencies will cascade down to the benefits of its members.
CCRIF’s parametric insurance and sovereign risk transfer products are seen as valuable ex-ante disaster risk financing tools, helping countries to protect their economies and people against the negative impacts of major disasters and enabling faster recovery when disaster strikes.
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