New funding from Germany through KfW is set to enhance the affordability and utility of parametric sovereign disaster risk transfer products offered through the CCRIF SPC (formerly named the Caribbean Catastrophe Risk Insurance Facility) to Caribbean and Central American countries.
Germany has delivered the largest single round of funding from one donor under the Central America and Caribbean Catastrophe Risk Insurance Program (CACCRIP), which is designed to help countries in the region increase their resilience to rising disaster risks through support for insurance and reinsurance mechanisms that offer rapid payouts when catastrophes occur.
The funding will specifically be used to help enhance the affordability of sovereign catastrophe risk transfer for the perils of earthquakes and climate related risks for participants in the CCRIF SPC.
This multi-country risk pool provides parametric disaster insurance for perils including earthquakes, hurricanes and extreme rainfall events, tapping the reinsurance and capital market for the support for the risk pool.
The funding will also be put to work to develop and implement new or improved disaster risk financing and insurance strategies for the region.
“With climate change, we can expect more frequent and intensive weather events and hurricanes. This calls for countries to build resilience from a 360 degree perspective from disaster preparedness to physical and financial resilience,” explained Jorge Familiar, Regional Vice President for Latin America and the Caribbean at the World Bank. “This initiative is part of a broader engagement where we are working with countries in the Caribbean and Central America to develop cost-effective, affordable and sustainable disaster risk financing and insurance strategies.”
“This is an important step to enhance the support to the Central American countries in their efforts to adapt to the impacts of climate change,” added Ingrid-Gabriela Hoven, Director General for Global Programs at the World bank. “The CCRIF is an important part of the InsuResilience Global Partnership. The CCRIF has proven its ability to quickly help poor and vulnerable people in the aftermath of disasters.”
The ongoing development and ramping up of coverage under the CCRIF is vital to a region devastated by disasters in recent years, with affordable parametric insurance, backed by the depth of the global reinsurance and capital markets, set to play an increasingly important role in helping sovereigns in the region build climate and disaster resilience.
The funding may help the CCRIF in achieving more efficient risk transfer of its own. As with a growing risk pool the chances of a second CCRIF catastrophe bond may be rising as well, particularly if funding can assist on the costs of structuring and issuance.
The funding may also assist with the ongoing expansion of the CCRIF and its range of parametric disaster risk transfer products, which will also result in further growth of the underlying risk pool, requiring greater use of reinsurance capital to support the facility.