Grand Cayman, Cayman Islands – Following Tropical Cyclone Elsa, Caribbean Catastrophe Risk Insurance Facility (CCRIF) made two payouts to the Government of Barbados under the country’s tropical cyclone and excess rainfall parametric insurance policies, totalling US$2.5 million.
CCRIF also made payments totalling US$528 512 to three other member governments – Haiti, St Lucia, and St Vincent and the Grenadines – under the Aggregate Deductible Cover (ADC) feature of CCRIF’s tropical cyclone policies.
Hurricane Elsa was the fifth tropical cyclone in the 2021 Atlantic Hurricane Season.
In a statement today, CCRIF said since its inception in 2007, the Facility has made 52 payouts totalling US$202.5 million to 16 of its 23 members, with the Government of Haiti receiving four payouts totalling US$38.3 million and the Government of Barbados receiving seven payouts totalling US$21.8 million. These two countries have received about 30 per cent of CCRIF’s total payouts.
Parametric insurance that is offered by CCRIF is very different from traditional indemnity insurance. CCRIF’s parametric insurance products make payments based on the intensity of a natural hazard event (for example, hurricane wind speed, earthquake intensity, and volume of rainfall) and the exposure or assets affected by the event, and the amount of loss calculated in a pre-agreed model caused by the event.
Thus, CCRIF does not need to wait for on-the-ground assessments of loss and damage – unlike with indemnity insurance – to make payouts, enabling the Facility to disburse funds to governments within 14 days of an event.
The statement also said a CCRIF policy is therefore triggered based on the government loss estimated in the loss model, which in turn is based on the characteristics of the hazard – wind and storm urge for tropical cyclone policies and amount of rainfall for excess rainfall policies – and the vulnerability, distribution and exposure of government assets affected by the event.
A country’s policy is triggered when the modelled loss for a hazard event in a member country equals or exceeds the attachment point selected by the country and specified in the policy contract (similar to a deductible in a traditional insurance contract).
In 2017, CCRIF introduced a new feature, the Aggregated Deductible Cover (ADC), for tropical cyclone and earthquake policies. It was designed to provide a minimum payment for events that are not sufficient to trigger the CCRIF policy because the modelled loss is below the policy’s attachment point.
“CCRIF represents a cost-effective way to pre-finance short-term liquidity to begin recovery efforts for an individual government after a catastrophic event, thereby filling the gap between immediate response aid and long-term redevelopment,” according to the statement. (PR)
