Tonga: first to benefit from Pacific Risk Insurance payout

Programme highlights how sovereign disaster risk transfer can close the financial gap to help communities bounce back.

On 11 January, the category 5 Cyclone Ian swept across the island of Tonga killing one person, displacing thousands and causing tremendous devastation to crops and infrastructure.

Hundreds of families in several communities were affected by the cyclone, which destroyed homes and critical functions such as health centers and schools. According to reports, up to 75 percent of the  buildings have been damaged in some parts of Ha'apai, as well as power and communication networks.

Swift payout to meet an urgent need

Tonga is one of six Pacific island countries' together with Cook Islands, Marshall Islands, Samoa, Solomon Islands and Vanuatu which currently participate in the Pacific Catastrophe Risk Insurance Pilot. Launched in January 2013, the pilot, arranged by the World Bank, tests a risk transfer arrangement modeled on an insurance plan which is covered by Swiss Re and other insurance companies. Cyclone intensity and earthquake magnitude parameters of an event are used to determine payouts, which allows for swift distribution of funds.

Funds received under the scheme will allow the government to meet the most urgent needs to repair and rebuild Tonga in the days and weeks ahead.

Long-term growth the goal

Ivo Menzinger, Head of Global Partnerships, Asia-Pacific for Swiss Re says that this shows how Swiss Re can contribute to a speedy restoration of the lives, homes and business activities of the people of Tonga.

"Sovereign disaster risk transfer is increasingly used to close the financial gap between economic losses and traditional insurance payouts. It is a fast track solution to provide financial relief for the poorer section of the population and to fund reconstruction efforts," Menzinger says.

"Several of these schemes such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF), FONDEN and now the one in the Pacific Islands have proven their usefulness and paid out claims. Others, such as The African Risk Capacity, are following suit. This is proof that the model works, and can help pave the way from short term relief and recovery to long term growth."

Published 29 January 2014

Thai Rice Insurance Scheme scales...

Thailand is amongst the world's top rice exporters. Rice is generally cultivated across the entire country and huge parts of Thailand's population earn their living from rice farming. For centuries, farmers'...

Read the whole story

Speedy insurance payout of USD...

The tally of lives lost, and number of people displaced in the wake of Matthew is tragic. Outbreaks of cholera due to water mixing with sewage in Haiti is further aggravating the extreme hardship, emphasizing...

Read the whole story