Cayman Islands-based catastrophe facility CCRIF SPC has increased its membership with the addition of Panama, which purchased parametric insurance cover for excess rainfall.
CCRIF’s membership now stands at 21 countries – 19 Caribbean governments and two Central American governments. CCRIF added four new members to the facility this policy year, which began on June 1, 2018. The new members are British Virgin Islands, Montserrat, St. Maarten and now Panama, with Panama being the facility’s second member from Central America (along with Nicaragua, which has been a member since 2015).
In Panama, events related to excess rainfall, such as “La Purisima” in 2010 and the floods in the Province of Colon in 2012, both caused losses of more than US$270 million and forced, on one occasion, the temporary closure of the Panama Canal operations, said the CCRIF in a statement.
CCRIF said the facility is not designed to cover all losses on the ground but instead provides capital for emergency relief and early recovery needs, thereby reducing post-disaster resource deficits and government budget volatility. Indeed, CCRIF noted that Panama’s participation in the facility forms only part of the country’s disaster risk contingency planning, which includes risk transfer.
Empirical evidence based on studies undertaken by the World Bank illustrates that insurance obtained through CCRIF could be as low as half the cost of coverage a member country could obtain through the reinsurance market on its own, said the CCRIF.
CCRIF’s parametric insurance products are insurance contracts that make payments based on the intensity of an event (for example, hurricane wind speed, earthquake intensity, volume of rainfall) and the amount of loss calculated in a pre-agreed model caused by these events. Therefore, payouts can be made very quickly – within 14 days of the event. On the other hand, traditional or indemnity insurance settlements require on-the-ground assessment of individual losses after an event before a payment can be made.
Since the facility’s inception in 2007, CCRIF has made 38 payouts totaling US$139 million to 13 member governments.
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