CCRIF (formerly named the Caribbean Catastrophe Risk Insurance Facility) has expanded its parametric insurance risk pool with the addition of a new member in Central American nation Guatemala.
Guatemala has purchased a parametric rainfall insurance policy for the 2019/20 policy year from the CCRIF, which takes the facilities membership to 22 countries, 19 of which are from the Caribbean, 3 from Central America.
As the CCRIF expands its risk pool, the growing scale in terms of premiums and geographic and peril diversification all help to ensure greater reinsurance efficiencies at renewal time for the facility.
This is key, as it helps CCRIF to keep its parametric insurance policies as keenly priced as possible and so all members benefit from the expansion and diversification of the risk pool, while the global reinsurance market benefits from an expanding source of opportunity when the CCRIF renews its protection.
The excess rainfall insurance policy will pay out to Guatemala when monitored rainfall levels surpass a pre-defined trigger point, enabling a rapid payout and disbursement of important post-disaster liquidity and risk capital.
CCRIF began offering parametric insurance to Central American countries in 2015, expanding the risk pool to cover two distinct regions.
By aggregating disaster risks within the two regions, Central America and the Caribbean, but keeping the risks segregated across regions, CCRIF’s risk pool and ultimately members benefit from the kind of risk diversification that countries alone could not attain.
In addition members benefit from reducing costs due to sharing of operational services across both regions.
Studies undertaken by the World Bank show that parametric insurance obtained through CCRIF may be as low as half the cost of coverage that a member country could secure if it approached the reinsurance market on its own.
CCRIF benefits its members through efficiencies of operation, scale and reinsurance market access, thanks to the aggregation and diversification of the risk pool, but importantly it remains true to its mission of providing necessary financial liquidity when disaster strikes.
CCRIF CEO Isaac Anthony commented, saying, “CCRIF was not designed to cover all losses on the ground, but rather to provide a quick injection of liquidity following a natural disaster for emergency relief and early recovery needs, thereby reducing post-disaster resource deficits and government budget volatility.”