The Caribbean island of St Lucia has increased its participation level in the CCRIF SPC (formerly known as the Caribbean Catastrophic Risk Insurance Facility), buying an enlarged slice of parametric disaster insurance protection for 2020.
The CCRIF SPC provides parametric disaster insurance protection to Caribbean and Central American nations, covering perils including tropical storms, earthquakes, excess rainfall, among others.
The CCRIF acts as a risk pooling facility, assuming parametric disaster risk exposure from its members, pooling that risk to enable efficiencies based on diversification and then leverages the global reinsurance and capital markets for risk transfer to ensure it can pay claims when they occur.
In the past the CCRIF has tapped the ILS market using catastrophe bonds, but in recent years has been more focused on traditional forms of reinsurance protection.
Growth of the risk pool helps all its members, in terms of diversification and importantly economies of scale, as the more parametric risk the CCRIF underwrites the greater the leverage it has when negotiating reinsurance.
Hence, St Lucia upsizing its disaster insurance purchase from the CCRIF is positive for all its members.
Under its disaster risk financing policy, the St Lucia government has increased its level of coverage under the CCRIF, local news sources reported.
Trend Media reported that Matthew Branford, St Lucia’s Deputy Director for Financial Administration, said that the island nation has updated its disaster risk financing policy and requirements in line with the forecasts for a particularly active hurricane season.
“We’ve actually increased our coverage because based on the various models for this year, they have increased intensity for the hurricane season and so we have actually been very cautious and have expanded our coverage. So, we’ve actually transferred more risk to CCRIF so that is can alleviate any fiscal pressures in the initial stage in the aftermath of a disaster,” Branford said in an interview.
St Lucia has been a member of CCRIF since its inception in 2007, buying parametric risk transfer protection every year and benefiting from the efficient access to reinsurance capital that the risk pooling facility enables.
Branford cited the expanding range of coverages on offer from the CCRIF, including the COAST fisheries industry policies, which St Lucia was one of the first to buy.
He also highlighted the ability of the CCRIF parametric insurance policies to pay out in less than 14 days, which is only due to their parametric nature and the fact no lengthy claims assessments are required.
“We have benefited quite a lot from being a member of CCRIF in the Caribbean,” Branford explained.
St Lucia’s government is always exploring expansions to its disaster risk financing and right now is focused on health disasters, in the wake of the pandemic.
The World Bank continues to assist the Caribbean island nation and can also ensure access to reinsurance capital remains open to their needs.
The CCRIF continues to demonstrate how parametric coverage and risk pooling can come into its own, scale with the support of reinsurance capital and provide meaningful coverage to boost the resilience of people in many climate and weather exposed regions of the world, developing and developed.