GRAND CAYMAN, Cayman Islands — The Caribbean Catastrophe Risk Financing Facility (CCRIF) announce that member countries of the Council of Ministers of Finance of Central America, Panama, and the Dominican Republic (COSEFIN) will receive special benefits on CCRIF SPC parametric insurance policies for policy year 2020/21 as part of the Facility’s response to the COVID-19 pandemic. These benefits include a 50 percent reduction in premium costs on their parametric insurance policies or a mutually agreed increase in CCRIF coverage at no additional cost or a combination of both. This effort is supported by a Multi-Donor Trust Fund (MDTF), administered by the World Bank.
For policy year 2020/2021, CCRIF members Guatemala, Nicaragua, and Panama have renewed their policies and will be increasing their coverage as a result of the benefits offered this year. Other COSEFIN countries are eligible for these benefits, with CCRIF SPC maintaining dialogue to support countries in understanding parametric insurance products and joining the Facility.
CCRIF chief executive officer, Isaac Anthony appreciated these decisions: “I am encouraged by the fact that our Central American members have not only renewed their policies but also will be increasing their coverage, indicating that they recognize the important role of catastrophe risk insurance in reducing budget volatility after natural disasters.”
The report, “Assessing the Effects of COVID-19 to Plan the Recovery”, prepared in April by UNECLAC, indicated that the COVID-19 pandemic would result in the worst economic contraction in the history of Latin America and the Caribbean and is coupled with the forecast showing above-average rainfall and an unusually active tropical hurricane season in the North Atlantic Ocean Basin. Also, the policy note on the rainy season in Central America during COVID-19 issued by the Coordination Center for the Prevention of Disasters in Central America (CEPREDENAC) reveals that countries are at serious risk of compound shocks as a result of the increased challenges of responding to the COVID-19 crisis.
In this context, CCRIF SPC and its parametric insurance products are crucial to ensuring that countries are better able to manage the fiscal impacts associated with natural disasters. CCRIF SPC’s insurance products can offer timely and predictable access to needed resources and ultimately mitigate long-term fiscal impacts.
In 2015, CCRIF and the Executive Secretary of COSEFIN signed a Memorandum of Understanding (MOU) to allow COSEFIN member countries to have access to CCRIF’s low-cost, high-quality sovereign parametric risk insurance. Over the last five years, CCRIF has worked closely with COSEFIN member countries to support the increasing role of ministries of finance in disaster risk financing. In November 2019, CCRIF, in partnership with the executive secretariats of COSEFIN, CEPREDENAC and the regional committee on Hydraulic Resources (CRRH), and the World Bank, hosted a regional workshop in Mexico City on disaster risk financing and parametric insurance to further increase capacity in these countries.
CCRIF provides parametric insurance policies for tropical cyclones, excess rainfall, earthquakes, and fisheries to 19 Caribbean and three Central American governments. Since its inception in 2007, CCRIF has made 43 payouts totalling almost US$156 million to 14 of its 22 member governments – all within 14 days of the event. Guatemala is the most recent recipient with a payout to be made following severe rains that affected the country during Tropical Storms Amanda and Cristobal. One other Central American member, Nicaragua has received payouts: on its tropical cyclone and earthquake policies following Tropical Storm Otto and an earthquake in June 2016, respectively.
The Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund (MDTF), administered by the World Bank, supports the continued expansion of CCRIF SPC’s products, services, and membership in Central America.