The CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) has made a payout to the Government of Dominica under its excess rainfall policy for the torrential rains caused by recent tropical storm Erika.
The payout amounts to EC$6.5 million (approximately US$2.4 million), which is the maximum payable under the parametric excess rainfall policy.
The rains that occurred during Tropical Storm Erika on August 27, 2015 devastated Dominica, resulting in an expectation that the economic loss would amount to as much as 50% of the island nations GDP. The CCRIF payout, while small, will be welcomed for reconstruction efforts, particularly due to the very quick payout in just two weeks thanks to the parametric trigger of the insurance product allowing for a rapid disbursement of funds.
Erika, the fifth named storm of the 2015 Atlantic Hurricane Season, maintained tropical storm status for its entire life cycle. The eye of the storm passed about 90 miles to the north of the Commonwealth of Dominica at its nearest point, resulting in significant rainfall across the island.
The Caribbean Disaster Emergency Management Agency reported that the Canefield Airport near the capital of Roseau, Dominica recorded a huge 12.64 inches of rain in a 12-hour period on August 27. The result was severe flooding and landslides, which lead to the deaths of approximately 30 persons and causing widespread structural damage.
Repairs to bridges and roads were expected to total around $226m, with Dominica’a annual GDP somewhere around the $500m mark. This underscores the impact that natural disasters can have on emerging economies, setting them back significantly, which makes availability of catastrophe insurance and risk transfer vital.
Dominica is among 12 member countries that purchased excess rainfall coverage from the CCRIF this year; up from 8 countries that purchased excess rainfall policies for the first time last year. The CCRIF’s excess rainfall coverage complements the country’s hurricane (tropical cyclone) insurance which is based on damages caused by wind and storm surge.
This is the second time that the Government of Dominica has received a payout from CCRIF. In 2007, a payout was made under Dominica’s earthquake policy for a magnitude 7.4 earthquake that occurred near the island in November of that year.
CCRIF CEO, Mr. Isaac Anthony stated; “The CCRIF Board and Team wish to express our condolences to the people of Dominica for the loss of life and disruption of livelihoods and we offer our support as you implement your recovery and rehabilitation activities. We are hopeful that the funds received from CCRIF will provide immediate liquidity to address your most urgent needs.”
The CCRIF will also, following a consultation with the Government of Dominica, provide additional financial assistance under its Technical Assistance Programme, for specific rebuilding projects on the island to help recovery efforts.
While the payout is small (although the maximum under Dominica’s current policy), the CCRIF’s excess rainfall policy demonstrates the value that a rapid payout using a parametric trigger can provide. This disastrous flooding is an example of the massive losses that can be incurred due to tropical storm driven rains, making insurance an essential component of a comprehensive disaster management programme.