The World Bank has approved a $2.5 million grant that will pay the Republic of the Marshall Islands premiums for parametric disaster insurance coverage under the Pacific Catastrophe Risk Assessment and Finance Initiative (PCRAFI).
The grant is designed to support that Marshall Islands goal of strengthening its resilience to natural disasters, including tropical cyclones and tsunamis, and enhancing its ability to respond quickly when catastrophes strike.
The grant will help the Marshall Islands with funding for five more years of premiums for parametric disaster risk insurance under the Pacific Catastrophe Risk Assessment and Finance Initiative (PCRAFI), the regional, parametric catastrophe risk insurance pool that provides rapid payouts in the event of a major natural disaster.
The PCRAFI facility operates in a similar manner to the CCRIF in the Caribbean, pooling countries risks in order to achieve more efficient access to reinsurance backing, while offering parametric insurance products tailored to the individual needs of the members.
“Pacific Resilience Program investments are about supporting governments in the Pacific Islands, including the Marshall Islands, to ensure they are best prepared to respond to and recover from severe natural disasters,” explained Michel Kerf, World Bank Country Director for Timor-Leste, Papua New Guinea and the Pacific Islands.
“This additional funding will ensure the Marshall Islands can continue its participation in the Pacific Catastrophe Risk Assessment and Finance Initiative, which will deliver essential funds for recovery in the event of a major natural disaster.”
The global reinsurance market enables initiatives like PCRAFI to be successful, alongside the donor support from organisations like the World Bank.
The renewal time for the PCRAFI risk pool is approaching again, having renewed its reinsurance protection in November last year, at which time it expanded the risk pool by 18% to $45 million, with the backing of four major reinsurers.
The risk pool could grow again in 2018, we’d imagine, making the pool even more attractive for reinsurance capital providers and perhaps making the execution of the renewal even more efficient for the members.
In future, as PCRAFI’s use of reinsurance capital increases, the capital markets and ILS funds may find a chance to play a role in supporting its further growth with their efficient risk capital.