Cayman Islands, November 20, 2024. The Government of Panama received US$26.7 million from CCRIF SPC within 14 days of a rainfall event that affected that country during October 31 to November 4, 2024. According to reports, this event resulted in landslides, flooding, fallen trees, the collapse of some bridges and loss of crops in some areas. Some 1,500 people were negatively affected, and 11 persons have lost their lives due to heavy rains this month. CCRIF sends its deepest sympathies to those impacted as well as to the families and friends of those who lost loved ones.
Mr. Francisco Álvarez, Director at the Directorate of Investments, Concessions and State Risks (DICRE), explained that the CCRIF coverage is part of the national strategy to protect the country against natural disasters. This strategy, backed by a cabinet resolution, includes disaster risk financing tools for both risk transfer and risk retention to financially protect the country’s economy. In addition to its CCRIF parametric insurance policies, the Government also has contingent credit lines from the World Bank and the Inter-American Development Bank. Panama has two CCRIF policies for excess rainfall and one policy for earthquakes.
Mr. Álvarez stated, “Parametric insurance allows the State to respond quickly to emergencies caused by phenomena such as excess rainfall, mitigating their fiscal and social impact.”
CCRIF is able to provide payouts within 14 days because its parametric insurance policies make payments based on the intensity of a natural hazard event (for example, volume of rainfall), the exposure or assets affected by the event, and the amount of loss caused by the event, calculated in a pre-agreed model. Thus, CCRIF does not need to wait for countries to make claims based on an on-the-ground assessment of loss and damage and can disburse funds quickly to members if their policies are triggered.
Climate change is causing the increasing frequency, intensity and unpredictability of hydrometeorological events, which is resulting in widespread social and economic impacts. Speaking from COP 29 (the 29th Conference of Parties to the United Nations Framework Convention on Climate Change) in Baku, Azerbaijan, CCRIF CEO, Mr. Isaac Anthony, reiterated the role of CCRIF and its parametric insurance products as a loss and damage strategy and indicated that, “Whilst countries implement several climate adaptation strategies to enable them to better cope with climate-related events, there is also loss and damage as a result of climate change that they must contend with. Loss and damage refers to those negative effects that occur even after current adaptation efforts. A key disaster risk financing instrument for addressing loss and damage is parametric insurance”. He continued by saying that, “Parametric insurance covers more than physical damage; it also covers economic exposure, thereby helping governments so they do not need to halt social and development programmes to address immediate needs post disaster”.
In the last five years, CCRIF members have been routinely ceding over US$1 billion in insurance coverage to CCRIF. For policy year 2024/25, total coverage purchased by CCRIF members increased by 10 per cent over the previous policy year.
In 2020, following Hurricane Eta, the Government of Panama received a payout of US$2.7 million from CCRIF and used this payout to, among other things, provide humanitarian aid to affected persons and communities; repair access roads to communities affected by landslides; and provide assistance to farmers who lost their crops as a result of flooding. Parametric insurance is not designed to cover all the losses following a natural disaster, but it plays a key role in closing the liquidity gap by providing governments with access to financial resources to respond to the immediate needs brought about by the disaster.
These two payments to the Government of Panama, brings to 13 the number of payouts that CCRIF has made this policy year, which started on June 1, 2024. CCRIF made a payout of US$6.4 million to the Government of Guatemala following a rainfall event in June and 10 payouts totalling US$84.5 million following Hurricane Beryl.
Since it opened its doors in 2007, CCRIF has made 75 payouts totalling US$358.5 million. The payouts to Panama will bring these figures to 77 payouts, totalling US$385.2 million.
Today CCRIF offers 6 parametric insurance products – for tropical cyclones, excess rainfall, and earthquakes, and for the energy and water utility sectors and the fisheries sector. The Facility has 30 members – 19 Caribbean governments, 4 Central American governments, 3 electric utility companies, 3 water utility companies and 1 tourist attraction, illustrating that it is able to provide bespoke parametric insurance solutions for multiple perils as well as social and economic sectors that are likely to be negatively impacted by climate change.
