CCRIF has made a payout to the Government of The Bahamas totaling US$12.8 million (US$12,824,153) following the passage of Hurricane Dorian that caused widespread devastation in the northern part of the country affecting 2 of the 16 main islands that make up this archipelago of islands and cays. The Bahamas has 3 tropical cyclone policies and 3 excess rainfall policies with CCRIF – each covering a section or zone of the archipelago - North West, South East and Central. The Government received US$11,527,151 from the triggering of its tropical cyclone policy and US$1,297,002 from its excess rainfall policy for the North West zone – which includes Abaco Islands and Grand Bahama. Dorian made landfall on 1 September and battered the Abaco Islands and Grand Bahama, in the north of the archipelago, for two days.
CCRIF’s payouts are made within 14 days of an event, but in this case, CCRIF made an advance payment of 50 percent of the preliminary estimated payout within 7 days to allow the Government to begin to address its most pressing needs - with the remaining 50 percent paid within the 14-day window for all CCRIF payouts. In response to the payout, Deputy Prime Minister of The Bahamas Peter Turnquest said in the press, “the Caribbean Catastrophe Risk Insurance Facility is worth it. The hurricane insurance is going to give us roughly $10.9 million [the initial payout estimate] which is more or less in line with what we expected”.
CCRIF will discuss with the Government of The Bahamas its offer to provide some additional support from the Facility’s corporate social responsibility or technical assistance (TA) Programme. Over the years CCRIF has provided resources from its TA Programme to governments to support specific projects after a natural disaster. In fact, The Bahamas was the recipient in 2012 of a TA grant of US$85,000 following the passage of Hurricane Sandy for the construction of a new sea wall at Sandyport Beach. Similar size grants have been provided over the years to Jamaica (US$ 100,000 for the rehabilitation of the Muirton Boys Home following Hurricane Sandy in 2012) and Dominica (US$100,000 for the construction of new fencing at the Douglas-Charles Airport which was damaged by the Tropical Storm Erika in 2016) among others.
Following the payment, CCRIF CEO, Isaac Anthony said that “member governments are appreciative of this rapid infusion of quick liquidity through CCRIF payouts from its parametric insurance policies which they are able to use to address immediate priorities and to support the most vulnerable in their population”. He noted that “CCRIF, through the parametric insurance products that it provides, is an example of a disaster risk financing tool that is most applicable for high impact low frequency events; and the instrument is designed to allow member governments to reduce their budget volatility and to provide some amount of financial resources for emergency relief such as restoring critical infrastructure and providing assistance to the affected population, thereby assisting to reduce post-disaster resource deficits”.
These rapid payouts are possible because the insurance policies that CCRIF sells are parametric as opposed to indemnity insurance, otherwise referred to as traditional insurance. Parametric insurance products are insurance contracts that make payments based on the intensity of an event (for example, hurricane wind speed, earthquake intensity, the 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 after a hazard event, making CCRIF’s parametric insurance different from traditional/indemnity insurance that require an on-the-ground assessment of individual losses after an event before a payment can be made – which can take months for a claim to be settled.
CCRIF encourages member countries to use its parametric insurance policies in conjunction with other disaster risk financing instruments towards building a financial protection strategy that combines a number of instruments that address different layers or types of risk which best balances budgetary conditions with the need to manage the ongoing economic liability which natural disasters present, especially in the face of a changing climate.
Since CCRIF’s inception in 2007, the Facility has made 40 payouts totaling about US$152 million to 13 of its 21 member governments. The truth is, “what we do is really about supporting governments to help their populations – communities, businesses and key sectors such as education, agriculture, etc. A rough assessment of the beneficiaries of these payouts show that over 2.5 million persons in the Caribbean and Central America have benefitted directly or indirectly from these payouts after a disaster”, said Mr. Anthony.
CCRIF looks forward to continuing to work with the Government of The Bahamas in their recovery efforts, including supporting the country to increase its long-term resilience to hydrometeorological hazards such as storms and hurricanes, the frequency and impacts of which are being exacerbated by climate change.
CCRIF Makes ADC Payments Following Dorian to Five Member Governments
During Tropical Cyclone Dorian’s initial path through the Caribbean, it affected CCRIF members Barbados, Saint Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis and Sint Maarten as a tropical storm. As it strengthened into a hurricane it affected the British Virgin Islands but with tropical-storm-force winds. These governments all have CCRIF policies for tropical cyclones but the modelled losses were below the countries’ policy attachment point and therefore no payouts under the policy were due.
However, these countries all have a special policy feature called the Aggregated Deductible Cover (ADC), which supplements their main tropical cyclone policy. The ADC is a recent policy feature for tropical cyclone and earthquake policies first introduced in the 2017/2018 policy year. It was designed to provide a minimum payment for events that are objectively not sufficient to trigger a CCRIF policy, but which may have caused some level of damage in a member country. Following Dorian, the ADC was activated for Barbados, Saint Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis and the British Virgin Islands, which received payments totalling US$351,406.
Since the feature was introduced, CCRIF has made seven other payments totalling almost US$700,000 under the ADC of countries’ tropical cyclone or earthquake policies – following Hurricanes Irma and Maria in 2017 and an earthquake in Haiti in October 2018. Total payments to date under countries’ ADC feature are a little over US$1 million. These payments, while small, allow governments to address immediate pressing needs in the days following the hazard event.
