CCRIF risk pool grows 14%, approaches $1bn of parametric limit

The CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) has grown its risk pool by over 14% in a year, as its members renewed and extended their parametric disaster insurance coverage under the facility.

The CCRIF’s parametric risk pool is now nearing $1 billion of coverage limit in size, an impressive achievement if you consider that the facility only launched back in 2007 and the parametric disaster insurance protection it provides did not exist prior to that time.

The risk pool has now reached US $963.87 million in size for the 2019/20 policy year, as determined by the collective coverage limit, up 14% from the 2018/19 coverage year’s US $843.98 million.

At almost a billion dollars in size, the reinsurance efficiencies gained by pooling all of its members sovereign disaster risk together will be increasingly significant and with further growth expected, as the CCRIF looks to expand its product range further an encourage new membership, those reinsurance synergies are likely to accelerate.

The CCRIF has always been operating on the basis of achieving cost synergies for its members by growing the risk pool, making it increasingly diversified and as a result increasingly attractive to its reinsurance panel.

For the sovereign members of the CCRIF risk pool, trying to acquire the same parametric risk transfer protection individually would likely result in much higher costs.

By merging the regions disaster risk into a single risk pool, that has diversification naturally embedded within it as well, the CCRIF can benefit from more attractive rates for its reinsurance coverage.

At its most recent renewal the CCRIF said that nine of its Caribbean government participants increased their level of protection for at least one of their parametric insurance policies, while one country added a second peril cover for tropical cyclone risks as well.

The CCRIF offers parametric disaster insurance protection against tropical cyclones, earthquakes and excess rainfall, while it is also adding new parametric products for drought, fisheries and aquaculture industries, as well as having additional products in development for the agriculture and public utilities sectors.

The CCRIF is also targeting bringing additional countries into the risk pool as well, with Central America targeted as well as the remainder of the Caribbean.

As a result of these initiatives it’s expected that the CCRIF’s risk pool will continue to grow and likely surpass the $1 billion in size over the coming year, which is a testament to its success.

Since the CCRIF’s launch in 2007, it has made 38 payouts amounting to US $139 million, with 13-member governments benefiting after their parametric insurance policies were triggered.

These payments are made within 14 days, typically, demonstrating the effectiveness of parametric risk transfer in making rapid payouts after instruments are triggered, which is vital to disaster relief efforts in countries affected by natural disasters.

It also underscores the willingness of the reinsurance providers to support the CCRIF’s member-base, which is a key element of the facility’s effectiveness.

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