The CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) has revealed that its 16 member countries all renewed their policies for 2015/2016, and at a discounted rate, while an additional four member states purchased excess rainfall coverage this year.
The entire 16 member countries of the CCRIF renewed their hurricane policies, which the CCRIF offered as part of a premium package following its positive financial performance, at a 50% discount. Similarly, the 13 countries that had earthquake policies all renewed also, and again at a discount of 50% for the 2015/2016 season.
At renewal the CCRIF also offered a 15% policy discount on excess rainfall policies, which likely contributed to a further four member countries purchasing the coverage, taking the total from 8 members to 12 which will now benefit from the rainfall protection.
The organisation introduced excess rainfall coverage last year and member countries that took advantage of it quickly saw the benefits, as four payouts totalling $3.4 million were paid to three CCRIF members during 2014. And now, in only its second year of offering protection against the peril 12 out of the 16 CCRIF members have purchased an excess rainfall policy.
Discussing the reductions in rates offered at renewal, the CCRIF said; “CCRIF recognises the increasing economic and financial pressures faced by member governments and continues to seek to minimise premium costs and offer preferable options for member countries.
“This rebate was a way of providing a benefit to member countries based on CCRIF’s positive financial performance.”
But a reduction in rates isn’t the only bonus the CCRIF offered to members at renewals. For hurricane policies the facility offered to reduce the minimum attachment point to a return period of 10 years.
“This means that CCRIF would begin to pay for losses resulting from a storm that statistically occurs every 10 years and therefore would increase the likelihood that a country would receive a payout,” explained the CCRIF.
Furthermore, member states were also given the option to reduce their hurricane policy exhaustion point, making the maximum payout more likely and “increasing the value of any payout made on the policy.”
The CCRIF said that the discounted rates, and lower attachment/exhaustion points were desirable to member states, and received good feedback.
The state of the global reinsurance market may also have helped the CCRIF to reduce its rates and lower the attachment points for hurricanes, with catastrophe reinsurance protection cheaper than it was previously. The CCRIF may have been able to pass some of this saving along for the 2015 renewal, benefiting the members with cheaper coverage.
The CCRIF has benefited in the past from cheaper reinsurance capacity, as well as the rise of insurance-linked securities (ILS), having tapped ILS capacity for the issuance of a catastrophe bond (World Bank – CCRIF 2014-1), to provide reinsurance protection, with the support of the World Bank.
Earlier this year the CCRIF and the COSEFIN signed a memorandum of understanding to enable Central American countries to join the sovereign catastrophe risk insurance pool, with Nicaragua being the first to do so.
Nicaragua purchased hurricane and earthquake protection during the 2015/2016 renewal noted the CCRIF, “and discussions are proceeding with other Central American countries for hurricane, earthquake and excess rainfall coverage.”
Despite forecasts for the 2015 Atlantic tropical storm and hurricane season activity remaining well below average, it only takes one large storm to make landfall to cause significant damage, particularly in domiciles of CCRIF members.
So far, the CCRIF has made 12 payouts since its inception in 2007, totalling roughly $35.6 million to eight member countries, or governments and, owing to the facilities use of parametric triggers all payouts have been transferred to the respective countries within two weeks.
The rapid payouts received by member countries post-event is essential in building the resilience and financial stability of CCRIF member countries, the majority of which are highly vulnerable to natural disasters and rely heavily on agricultural income, which is often impacted when disaster strikes.
Owing to the discounted rates offered at the recent renewal and fast payouts received by members at times of need it’s likely the facilities 16 member status will grow in the coming months.