Publication: Reducing Financial Vulnerability to Natural Disasters in the Caribbean : A Review of CCRIF's Operation After Its Third Season
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2011-04
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2011-04
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This is the third review of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and covers its third season of operation; from June 1, 2009, to May 31, 2010. CCRIF was established in May 2007 as an independent, non-profit legal entity to pool catastrophe risks and provide CARICOM Members and Associate Members with rapid access to an infusion of liquidity in the event of a major hurricane or earthquake.4 Offering parametric insurance with payouts based on specific indicators of speed, location, and intensity, CCRIF was the world's first facility of its kind. Domiciled in the Cayman Islands, it is controlled by a five-person Board of Director s, which consists of one representative of the member countries, one representative of the donors that have contributed to the Multi-donor Trust Fund (MDTF) that supports the Facilicy5, one financial and one insurance technical expert, and an Executive Chairman appointed by the other four directors. This review assesses CCRIF's 2009-2010 operations and its challenges and opportunities going forward. While intended primarily for the Facility s Board of Directors, it is hoped that it will also be informative and useful to the participating countries, donors, and other stakeholders. The review also aims to contribute to on-going discussions within the broader disaster risk management community about the possibilities for scaling up CCRIF's role in the Caribbean and replicating or adapting its innovative model of ex ante disaster risk financing in other disaster-prone regions of the world.
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โWorld Bank. 2011. Reducing Financial Vulnerability to Natural Disasters in the Caribbean : A Review of CCRIF's Operation After Its Third Season. The Caribbean catastrophe risk insurance initiative;. ยฉ http://hdl.handle.net/10986/21547 License: CC BY 3.0 IGO.โ
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Publication The Caribbean Catastrophe Risk Insurance Initiative : A Review of CCRIF's Operation After Its Second Season(Washington, DC, 2010-04)This report provides an external assessment of the operations of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) during its second policy year from June 1, 2008 to May 31, 2009. Developed at members and associate members of the Caribbean Community (CARICOM's) request following the devastation wrought on Grenada and the Cayman Islands by Hurricane Ivan in 2004, CCRIF was established in May 2007. The World Bank and a number of donors contributed to CCRIF's start-up capital and also underwrote a portion of some members' initial participation fees and premium payments during CCRIF's first three policy years. A multi-donor trust fund continues to reimburse CCRIF for certain eligible expenditures, thus facilitating continued growth of CCRIF's reserves and risk-bearing capacity. The report aims to contribute to on-going discussions within the broader disaster risk management community about the possibilities for scaling up the role of CCRIF in the Caribbean and replicating or adapting CCRIF's innovative model of ex ante disaster risk financing in other disaster-prone regions of the world. Rolling out the second-generation loss model, the anticipated excess rainfall coverage and, possibly, hurricane loss coverage for members of Caribbean Association of Electrical Utilities (CARILEC) will require intensive interactions with CCRIF's members, reinsurance markets, key partner institutions, and the media to ensure a common understanding of the model and the features, inherent basis risk, and benefits of the policies. Increasing CCRIF's transparency is also vital to broadening understanding of CCRIF's governance structure, modeling, and policy coverage and consolidating CCRIF as a well-recognized and widely-valued Caribbean institution.Publication The Cook Islands(Washington, DC, 2015-02)This country note is produced is part of The Pacific Catastrophe Risk Assessment andFinancing Initiative (PCRAFI). The geographic spread of the Cook Islands poses logistical problems for any necessary post-disaster relief and response efforts. The events of 2005 demonstrated that the Cook Islands is extremely vulnerable to the threat of tropical cyclones (TCs): in the two months of February and March 2005, TCs Meena, Nancy, Olaf, Percy, and Rae swept the country. The Cook Islands is expected to incur, on average, about NZ$6 million (US$4.9 million) per year in losses due to tropical cyclones. In the next 50 years, the Cook Islands has a 50 percent chance of experiencing a per-event loss exceeding NZ$97 million (US$79.5 million. The Cook Islands has a proactive approach to disaster risk financing and insurance (DRFI), which is supported by the upper echelons of government. In January 2011, the prime minister in his role as chair of the National Disaster Risk Management Council requested that the Ministry of Finance and Economic Management look at ways to become self-reliant in initial disaster response and generate new income streams for investment in a fund specifically for disaster management response and recovery. The Cook Islands has available a maximum amount of NZ$5.6 million (US$4.6 million) in the form of contingency funds and catastrophe risk insurance to facilitate disaster response. 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Consequently, ministers of the Central American integration system (SICA) and Caribbean community (CARICOM) countries have expressed a strong intention to collectively manage the disaster risk. By understanding the loss potential of disasters caused by natural events and the extent of public intervention in recovery and reconstruction efforts, governments can ascertain their respective contingent liabilities. Sovereign disaster risk financing and insurance can also safeguard against sudden macroeconomic shocks that negatively impact fiscal performance, and in turn, economic development. Caribbean and Central American governments are constrained in their ability to access quick liquidity to absorb fiscal shocks associated with natural hazard impacts because they have limited ability to create contingency funds, and limited capacity for external borrowing. 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In 2012 alone Fiji experienced three major events with estimated total damage of F$146 million (US$78 million). Fiji is expected to incur, on average over the long term, annual losses of F$158 million (US$85 million) due to earthquakes and tropical cyclones. In the next 50 years Fiji has a 50 percent chance of experiencing a loss exceeding F$1,500 million (US$806 million). The country has a taken a proactive approach to DRFI and developed a finance manual for post-disaster budget execution. The government now has F$3 million (US$1.6 million) available in DRFI instruments to facilitate disaster response and also implemented tax concessions to encourage donations in the wake of tropical cyclone Evan. A number of options to support ongoing DRFI improvements in Fiji are presented for consideration: (a) the finance manual developed by the Ministry of Finance for post-disaster procedures should be finalized, and cabinet approval should be sought; (b) an overarching disaster risk financing and insurance strategy should be developed that includes options for risk transfer; and (c) assets should be identified in order to develop an insurance program for critical public assets.Publication Sovereign Natural Disaster Insurance for Developing Countries : A Paradigm Shift in Catastrophe Risk Financing(World Bank, Washington, DC, 2007-09)Economic theory suggests that countries should ignore uncertainty for public investment and behave as if indifferent to risk because they can pool risks to a much greater extent than private investors can. This paper discusses the general economic theory in the case of developing countries. The analysis identifies several cases where the government's risk-neutral assumption does not hold, thus making rational the use of ex ante risk financing instruments, including sovereign insurance. The paper discusses the optimal level of sovereign insurance. It argues that, because sovereign insurance is usually more expensive than post-disaster financing, it should mainly cover immediate needs, while long-term expenditures should be financed through post-disaster financing (including ex post borrowing and tax increases). In other words, sovereign insurance should not aim at financing the long-term resource gap, but only the short-term liquidity need.
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