The Caribbean Catastrophe Risk Insurance Facility (CCRIF) said it has since October had to make payments totalling US$15.2 million for events associated with the 2022 hurricane season to at least three of its member governments.

According to the regional insurance fund facility, a total of four payments were made to countries namely: Nicaragua, which received US$8.9 million on the country’s tropical cyclone policy following Hurricane Julia; Trinidad and Tobago, which received US$5.84 million, following heavy rains that occurred during October 5-8, 2022 resulting in widespread flooding in the twin-island nation along with another US$420,645 paid to Antigua and Barbuda on the country’s excess rainfall policy following rains associated with Tropical Cyclone Fiona.

In addition to these policy payouts, the Turks and Caicos Islands also received US$668,857 on the Aggregated Deductible Cover (ADC) for the country’s tropical cyclone policy following Hurricane Fiona, which made landfall in that country on September 20.

Since its inception in 2007, the facility said it has so far made 58 payouts to about 16 of its 24 members. The latest payments bring its total policy payouts to approximately US$260 million.

CCRIF, which was developed to provide short-term liquidity when a parametric insurance policy is triggered, releases funds to affected countries so their governments can be able to quickly limit the financial impact of catastrophic hurricanes, earthquakes and excess rainfall events. Among the world’s first regional fund utilising parametric insurance, the facility offers member governments the unique opportunity to purchase earthquake, hurricane and excess rainfall catastrophe coverage with lowest-possible pricing.

Developed under the technical leadership of the World Bank, the segregated portfolio company (SPC) is capitalised with contributions from a multi-donor trust fund (MDTF) by the Government of Canada, the European Union, the World Bank, the governments of the UK and France, the Caribbean Development Bank and the governments of Ireland and Bermuda, as well as through membership fees paid by participating governments.

CCRIF Chief Executive Officer (CEO) Isaac Anthony, commenting on the latest payouts, stressed the need for parametric insurance as a must-have tool especially for governments in the Caribbean and Central America, in the face of what he has labelled to be a “changing climate”.

“CCRIF has been in the business of providing parametric insurance for the last 15 years and we continue to be encouraged that we are able to support our members to have access to quick liquidity after a natural disaster, to begin recovery efforts and to support the most vulnerable in their populations,” he stated.

With parametric insurance policies being very different from traditional indemnity insurance policies, the facility, which makes payments based on the intensity of a natural hazard event calculated in a pre-agreed model, does not need to wait for on-the-ground assessments of loss and damage to make payouts. As a result and unlike with what obtains for indemnity insurance, CCRIF is enabled to disburse funds to members within 14 days of an event.

Anthony further underscoring the importance of parametric insurance and the need for it not be to seen in isolation from other disaster risk financing tool, urged countries in the region to take a more holistic approach to disaster risk financing especially as they build a financial protection strategy that combines a number of risk financing instruments, one he said which aims to deal with different layers or types of risks including disaster reserve funds (DRFs), contingent credit facilities and CAT bonds.

“All these instruments have unique and distinct characteristics and are necessary to finance early response, recovery, and reconstruction needs while protecting a country’s fiscal balance,” he stated, noting that with this year’s hurricane season remaining on pace with expectations for an above-normal season, CCRIF stands ready to support its members in the coming weeks and as the region moves to close out the season on November 30.