The Caribbean Catastrophe Risk Insurance Facility’s (CCRIF) parametric excess rainfall insurance product has been triggered for the first time by hurricane Gonzalo’s rains, resulting in a $500,000 payout to the Government of Anguilla.
Hurricane Gonzalo passed directly over Anguilla on the 13th October 2014, causing flooding damage to buildings and communities. Anguilla is one of eight Caribbean nations that purchased a parametric excess rainfall policy from CCRIF in June as part of its annual renewal. Anguilla also renewed its tropical cyclone cover, but the modelled losses required to trigger this were not sufficient, however the excess rainfall policy has met the trigger conditions so a payout will be due.
CCRIF explained; “Modelled losses from TC Gonzalo were below Anguilla’s policy attachment point (deductible) and therefore their TC policy was not triggered. The excess rainfall policy complements the TC policy allowing Anguilla to be covered for two perils that often occur at the same time during tropical cyclones.”
The excess rainfall product was developed by CCRIF, Swiss Re and Kinetic Analysis Corporation and is targeted at providing protection for extreme high rainfall events of short duration, a few hours to a few days, whether they happen during a tropical storm, hurricane or not.
Like the CCRIF tropical cyclone and earthquake policies, the excess rainfall product is parametric meaning that payouts can be calculated and made rapidly, with 14 days. This payout is the second payment the Government of Anguilla will have received from CCRIF as in 2010 a payout of US$4,282,733 was made to Anguilla following Hurricane Earl, which passed close to the island that August.
CCRIF says that it is hopeful that the rapid payment of funds to Anguilla, made possible by a parametric triggered product design, under its excess rainfall policy will assist the Government of Anguilla in addressing immediate event response needs.
The CCRIF SPC, or CCRIF Segregated Portfolio Company, continues to be a great example for the use of parametric trigger design, risk pooling techniques and support from the international reinsurance and catastrophe bond market, to create a disaster insurance facility with payouts that are predictable and that meet a disaster recovery need.
It’s worth reading this event report published by the CCRIF for this rainfall event as it explains how the trigger, rainfall index and payout factors have been calculated.