The World Bank supported Pacific Catastrophe Risk Insurance Pilot has paid Vanuatu $1.9m after the risk pooling facility was triggered by Category 5 Cyclone Pam which struck the Pacific island nation on March 13th.
Demonstrating the important role that parametric triggers play in effecting rapid insurance payouts after disaster strike, the Pacific Catastrophe Risk Insurance Pilot has been able to disburse the payment in less than three weeks.
“We are deeply concerned for the people of Vanuatu in the face of devastation caused by Cyclone Pam,” commented Franz Drees-Gross, Country Director for the World Bank in Timor-Leste, Papua New Guinea, and the Pacific Islands. “The insurance payout will support Vanuatu in financing urgent relief and recovery efforts, as we continue to work with the government to identify priorities and offer assistance through various financial mechanisms.”
The payout might have been even quicker with a pure parametric trigger, but the Pacific facility utilises a modelled loss approach to the calculation meaning the payment is not as fast as some other facilities have been able to arrange in the past.
The project was implemented under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), and utilises parameters of actual events but takes a modelled loss approach to defining whether it has been triggered.
The Pacific risk pooling facility was launched with the support of the Japanese Government, the World Bank, the Secretariat of the Pacific Community (SPC) and the Global Facility for Disaster Reduction and Recovery (GFDRR). It aims to provide its members with a vital source of post-disaster recovery capacity and financial liquidity.
This payment is the second time the Pacific Catastrophe Risk Insurance Pilot has been triggered since it launched in January 2013. Tonga was the first country to benefit from a payout in January 2014 after Cyclone Ian.