Caribbean - From island mentality to watertight alliance

On average, nine tropical storms blow across the Caribbean each year, five of them achieving hurricane strength. There is also a significant earthquake risk in the region. With small economies and high debt levels, the Caribbean states are highly dependent on donors to finance post-disaster needs – and also frequently faced with the reality that donations arrive late or never at all. The Caribbean Catastrophe Risk Insurance Facility (CCRIF), set up in 2007, is a parametric risk transfer scheme geared to bringing 16 Caribbean governments immediate relief in the form of short-term liquidity in the event of hurricanes and earthquakes.

April 2012 - In the first year of its existence, the CCRIF already made two payouts following the magnitude 7.4 earthquake that shook the eastern Caribbean. The St. Lucian and Dominican governments received a total of USD 0.9 billion to finance urgent post-earthquake recovery efforts. In early 2010, when Haiti was struck by a massive earthquake, the government received the full policy amount of USD 8m. Objective earthquake location data from the United States Geological Survey (USGS) and wind speed data from National Oceanic and Atmospheric Administration (NOAA) shaped the payout models.

The CCRIF, the world’s first multinational parametric insurance facility, is owned and operated by Caribbean governments. It was set up under the guidance of the World Bank and Swiss Re is the co-lead reinsurer. In putting contingent funding in place before catastrophes occur, this program perfectly mirrors the urgent and beneficial rethink required to prepare a governments’ treatment of risks and their economic consequences to weather any storm.

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