The Pacific Catastrophe Risk Insurance Company (PCRIC), a parametric insurance facility for the Pacific Island nations which is supported by the World Bank and others, is hoping to expand its risk pool with the addition of new members and also through the creation of new risk transfer products.
Currently the Pacific Catastrophe Risk Insurance Company (PCRIC) has a risk pool amounting to roughly $45 million in size, based on the reinsurance required for its latest renewal, but the ambition is to grow this through the provision of coverage to more Pacific countries.
At the moment the PCRIC provides parametric insurance to five nations, the Cook Islands, Marshall Islands, Tonga, Samoa and Vanuatu, with each benefiting from parametric earthquake and cyclone protection from the facility.
One way of expanding the risk pool is through expansion to include more countries, something CEO of the PCRIC David Traill explained recently.
In a discussion with a regional radio station Traill said, “Ideally we’d like this to be as large as possible so that we can pool as much risk as possible across the Pacific.
“If we’ve got scale then that really does lead us to have more self-reliance within the Pacific community and that gives us greater ability to go in and have conversations with the international markets around, well this is the stuff we need to pass to you, but this is the stuff we can handle ourselves.
“Obviously, part of my role is to go have conversations with other countries and hopefully try to bring them all on board.”
Traill is also thinking of the parametric facilities reinsurance arrangements there as well, which could become more cost-effective as greater scale is achieved for the risk pool.
The other way to expand the risk pool is through the addition of more products to offer to the Pacific Island members. Traill expects new products to be developed over time, with a focus on the real needs of the region and the key exposures they face.
“In my mind it’s really important that government’s have options, because each country is exposed to natural perils in different ways,” Traill explained. “So for some people it might be about cyclones, for others it might be about earthquakes, for others it might be about flood or drought. We want to make sure we’ve got options that governments can choose from and balance their portfolio around what they really need so we can protect our communities as much as possible.
“At the moment we are looking at a couple of options around rainfall, especially flooding and drought for small countries. Droughts can be quite dramatic because you don’t have the catchment areas, so I’m looking forward to see how that product develops and see what we can do.”
The mission will remain the same as the PCRIC risk pool and product range expands, with parametric triggers used to ensure rapid payouts can be made.
Traill explained the importance of the triggers, saying PCRIC wants to be able to quickly assess the impact of an event and define whether emergency funds should be released to the covered countries.
“We can give them the money up front, as quickly as possible,” he explained, which is vital for the countries to begin the recovery process after major catastrophes strike.
The expansion of the risk pool underpinning this parametric Pacific Island focused catastrophe insurance facility will provide opportunities for reinsurance capital providers to participate, so helping the covered nations become more resilient to disaster risks while underwriting a new and diversifying source of risk.
The Pacific Catastrophe Risk Insurance Company (PCRIC) recently made its largest ever payout of $3.5 million to Tonga after the impact of Cyclone Gita.