Jamaica is seeking a greater level of cover from the Caribbean and regional disaster risk financing initiative the CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) as it works with the World Bank to enhance disaster resilience.
The Jamaican finance ministry said that it is working on a range of initiatives to strengthen the country’s ability to both withstand and respond to natural disasters and climate threats.
The work with the World Bank includes defining a strategy for disaster risk financing and insurance, including a review of spend on existing disaster insurance protections, as well as looking at post-disaster response.
The Jamaican Gleaner reports that the country has decided to double its spend on CCRIF SPC disaster insurance cover premiums and that it now plans to spend J$427.5m (approximately (USD$3.7m) in 2015 at its renewal. That compares to J$215m (USD$1.86m) spent on CCRIF SPC participation by Jamaica in 2014.
The newspaper reports that Jamaica is spending more despite not having been able to draw down on CCRIF funds after any disasters. However Jamaica has not been hit by a particularly devastating hurricane or earthquake since it began participating in the CCRIF.
Jamaica had not signed up to the excess rainfall policy that CCRIF SPC launched in 2014, so it may be that the additional spend in 2015 will go to adding that protection to the hurricane and earthquake cover it already has.
This would benefit Jamaica, as it would provide protection against tropical storms which do not have sufficiently high wind speeds to trigger the wind component of a CCRIF SPC policy, but which do cause damage from flooding and rainfall impacts.
The CCRIF SPC policies are designed to provide payouts when hurricanes or earthquakes of a defined strength or higher occur, while the rainfall policy provides a layer of protection for the kind of tropical rainfall that affects the Caribbean region.
In 2014 a number of countries claimed on their excess rainfall policies, proving the concept that this policy provides an added level of protection when storms do not reach the wind speeds necessary to trigger the parametric wind policy trigger.
Jamaica will have seen the positive experience these islands had last year and as a result may have decided to add the rainfall component at its next CCRIF SPC renewal.
The CCRIF SPC sponsored a catastrophe bond for the first time in 2014, with the World Bank’s support, as part of its own reinsurance risk transfer. As premiums underwritten by the facility grow, thanks to countries like Jamaica increasing use of its protection, it is likely that the use of cat bonds for reinsurance may grow over time as well.