The World Bank hopes to sign on new member countries for its parametric insurance facility, the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), as the latest phase of the initiative has already encouraged two new enquiries.
The World Bank recently signed off on the latest phase of the initiative with a $29.7 million investment into the ‘PCRAFI: Furthering Disaster Risk Finance in the Pacific’ project.
With the PCRAFI initiative providing parametric insurance coverage, backed by global reinsurance capacity, to a range of island nations, the ambition has always been to expand the risk pool more widely in order to take advantage of economies of scale to provide more cost-effective coverage.
The latest phase of the project offers greater support to the countries and government’s looking at the facility and already two new members are being mooted, as both Fiji and Micronesia express interest in joining.
The broader the risk pool that can be created the higher the chances that global reinsurance pricing to back the facility can be reduced, as the diversification within the risk pool and its increased size would attract greater interest and keener rates from the global reinsurance markets.
Samantha Cook, a consultant for the World Bank’s Disaster Risk Financing and Insurance (DRFI) program, explained is reported to have explained that on the facility’s aims is to help government’s better manage their budgets, avoiding having to reallocate capital after disaster strikes.
The use of parametric insurance products to provide contingent financing that supports sovereign government cedents after disasters is increasingly prevalent around the globe.
Cook also said that Fiji and the Federated States of Micronesia had both been struck by severe typhoon’s in recent years and have now expressed an interest in joining the PCRAFI initiative in order to benefit from its coverage.