8 Caribbean governments now insured against excess rainfall
Eight members of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) have purchased excess rainfall insurance for the 2014-15 policy year, the Cayman Islands-based agency announced this week.
They are: Anguilla, Haiti, Barbados, Dominica, Grenada, St Kitts-Nevis, St Vincent and the Grenadines and St Lucia.
Jamaica was among countries which expressed interest in the excess rainfall policy when it was introduced last year. However, when contacted on Thursday an officer in the Ministry of Water, Land, Environment and Climate Change, to whom the Financial Gleaner was referred, was unable to definitively say at that time whether Jamaica intended to purchase the policy.
The 16 CCRIF member countries, including Jamaica, have had CCRIF hurricane and or earthquake policies since 2007 when the facility became operational.
Developed by CCRIF and global reinsurer, Swiss Re, the excess rainfall product is aimed primarily at extreme high rainfall events of short duration ranging from a few hours to a few days, whether they happen during a hurricane or not.
Payout within 14 days
Like CCRIF's tropical cyclone and earthquake insurance, the excess rainfall product is parametric and estimates the impacts of heavy rain using satellite rainfall data from the Tropical Rainfall Measurement Mission (TRMM) and exposure from CCRIF's risk estimation database. TRMM is a research initiative undertaken by the United States National Aeronautics and Space Agency and the Japan Aerospace Exploration Agency.
In a release, CCRIF said that because the excess rainfall product is parametric, a payout can be made within 14 days after a rain event that triggers a country's policy, without waiting for time-consuming damage and loss assessments on the ground.
It quoted CCRIF Chief Executive Officer Isaac Anthony as saying that "the new excess rainfall product has been eagerly awaited by Caribbean governments, as we all realise that considerable damage in the region is caused by rainfall and flooding".
He added that the policy complements CCRIF's hurricane coverage, which determines losses based on wind and storm surge and said he hopes that other countries in the region will follow.
Swiss Re's chairman of Global Partnerships, Martyn Parker, said "securing excess rainfall insurance protection demonstrates that Caribbean countries are taking a proactive approach to manage the contingent risks posed by climate change".
Having purchased the rainfall policy, CCRIF said, those countries will now be able to respond better to an event such as the trough that brought heavy rains to the Eastern Caribbean in December 2013, which resulted in loss of life, extensive damage to infrastructure and widespread economic disruption.
It said the excess rainfall product is independent of the hurricane policy and if both policies are triggered by an event, then both payouts become due.
Taking into consideration the fiscal challenges facing many of its members face and their increasing levels of vulnerability, CCRIF said it continues to work towards reducing the overall premium cost.
Consequently, for the 2014-15 policy year, CCRIF offered two one-off premium discount options due to a third successive year in which none of the policies held by member countries were triggered by an event. The two discount
options were a 25 per cent reduction on tropical cyclone and earthquake policy premium if no excess rainfall policy is purchased, and up to a 50 per cent concession if applied to an excess rainfall policy.
In addition, as done previously, for 2014-15 policies, CCRIF allowed 50 per cent of the total premium to be held as paid-in participation fee - the one-time fee paid when a country joins the facility - with the excess therefore being available to co-fund premium, providing an opportunity to further reduce current expenditure on policy premiums.
Member countries which have not already done so can also exercise the option to reduce their attachment point to a 10-year return period for hurricanes. This would result in coverage being secured for events that occur more frequently.
"As the main part of the Atlantic hurricane season approaches, CCRIF remains committed to supporting its members in their disaster risk-management initiatives and their progress towards climate resiliency," the release said.
CCRIF is a not-for-profit risk pooling facility, owned, operated and registered in the Caribbean for Caribbean governments.
Since its inception, it has made eight payouts totalling US$32.17 million to seven member governments.