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Original Risk: A Society for Change Agents

CCRIF expands risk pool with two new countries, higher limits bought


The CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) has expanded its parametric risk pool for the 2018-19 policy year, with the addition of two new countries, the British Virgin Islands and Montserrat who both joined the facility as of June 1st and existing members buying more protection.

The addition takes the CCRIF risk pool to 19 countries, 18 from the Caribbean and 1 from Central America.

Growing the risk pool increases the diversity within it, adding to the economies of scale and efficiencies that the CCRIF benefits from when approaching the global reinsurance and capital market for its backstop protection.

The British Virgin Islands and Montserrat have both purchased parametric tropical cyclone and excess rainfall insurance policies and the Government of the Virgin Islands has also purchased parametric insurance cover against earthquakes from the CCRIF.

CCRIF CEO Isaac Anthony commented on the news, “the addition of these two countries to the risk pool is consistent with our current strategic direction which is geared towards scaling up the facility by adding new members, increasing products we offer and also encouraging members to increase coverage levels.”

It seems the experience of 2016 and 2017, when the CCRIF made $83.6 million of payouts for hurricanes Matthew, Irma and Maria, with all payments made within 14 days (some partial payments were made within 7 days) thanks to the parametric nature of the triggers used, has led CCRIF’s sovereign clients to increase their protection for the coming year.

The facility said that the two new members join the parametric risk pool at a time when others are increasing their coverage levels, a response to the impacts of recent hurricane events.

All of the existing members have renewed their parametric risk transfer protection for the 2018-19 policy year, but 12 of the governments have increased their coverage limit by at least 10% for either the Tropical Cyclone or Excess Rainfall product, while another two countries increased their coverage limits for their parametric earthquake protection.

CCRIF noted that governments are aware of the changing climate, particularly the potential for more frequent and intense storms, as well as heavier rainfall. But clearly members are also aware of the risk of quakes and see that protection needs to be sufficient to really make a difference should disaster strike.

The growing parametric risk pool, as well as the greater coverage limits sought by countries within it, all means the reinsurance program for the CCRIF will be growing as well.

The growth of the risk pool ultimately benefits all of the members, as the scale and added diversity within it means the reinsurance market can provide more competitive bids to cover it and also makes it increasingly appealing to the insurance-linked securities (ILS) market as well.

If the risk pool grows sufficiently over time, perhaps we could see the CCRIF once again looking to the capital markets for reinsurance in the form of another catastrophe bond.

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