CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) is seeking a further expansion of its range of parametric insurance products for the region, with utilities such as energy firms and drought coverage both potential avenues it is exploring.
Speaking at a conference in the Caribbean last week, CCRIF Chief Executive Isaac Anthony explained that CCRIF wants to expand the range of available parametric insurance products to provide coverage to underserved markets.
The steady expansion of the CCRIF risk pool means a requirement for increasing amounts of reinsurance capacity to underpin the risks it assumes, with the insurance-linked securities (ILS) market just one avenue CCRIF can tap for its own protection.
Among these is the regional utility industry, so energy, telecoms, water and other utilities, where a lack of specific disaster insurance is apparent, but the values at risk in terms of infrastructure and facilities relatively high.
Energy utilities and others can benefit significantly from parametric insurance protection, as these rapid paying disaster risk transfer instruments can deliver capital liquidity to a utility at the time it needs it most to ensure continuity for its clients, after major disasters such as hurricanes or earthquakes strike.
Not only can a parametric trigger mean a quick payout, it can also provide a payout when a weather or natural catastrophe event causes a shutdown or slowing of production or output, so providing a valuable source of business interruption protection that most utilities may lack today.
It’s not just the potential for damage to their physical assets then, it’s also damage to supply that parametric insurance can cover, while also providing a way to cover transmission lines and other distribution related infrastructure that can be damaged by even weaker hurricanes and tropical storms.
So the need is clear, especially with energy and other utilities in the Caribbean so exposed to hurricanes and other catastrophe events such as earthquakes.
It’s also the case that energy utilities in the Caribbean have often struggled to buy insurance at a reasonable price, hence it’s no surprise the CCRIF is looking to broaden its parametric product offering to corporate risk transfer buyers in this sector.
The Gleaner newspaper in Jamaica covered Anthony’s comments at the recent World Bank conference held in the region, quoting him as saying on energy utilities, “It is important for that particular sector to be up and running as quickly as possible after a disaster. So, we are currently doing modelling with CARILEC, which is the regional umbrella body for energy utility companies, and we also intend to expand that to the water and even telecoms sectors as well.”
The newspaper article went on to explain that some local energy utilities have created self-insurance funds to cover transmission line and distribution network risks, due to the cost of private market insurance.
By bundling the risks of regional utilities into the CCRIF risk pool, economies of scale and the efficiencies of the reinsurance and ILS market may be able to help in making this coverage more affordable in future, or in making a parametric triggered alternative appealing in place of more traditional indemnity insurance coverage.
In addition the CCRIF is looking at drought as another avenue of parametric insurance protection it can offer, which is also a good addition to the risk pool for diversifying reasons we’d imagine.
“We are introducing drought products, but also expanding scope by investing in our own custom risk models and risk visualisation platform for the region,” the CCRIF CEO explained.
CEO Anthony also mentioned the previously announced fisheries and aquaculture insurance product that the CCRIF is set to launch, saying, “We will support this by adding even more new products, such as fisheries, in collaboration with the World Bank and other departments for a product called COAST, aimed to enhance fisheries and agriculture in the Caribbean.”
It’s encouraging to see that the CCRIF has continuing ambitions to broaden its remit and ultimately expand its parametric risk pool to cover new industries as well.
The opportunity to double-down on provision of parametric disaster insurance to underinsured industry sectors in the Caribbean and surrounding region could be a significant opportunity to narrow an evident protection gap, with parametric risk transfer and efficient reinsurance capital a useful tool in achieving this as a goal.
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