GEORGE TOWN, Cayman Islands – The Saint Lucia Electricity Services Limited (LUCELEC) became CCRIF’s newest member when it purchased the Facility’s parametric insurance product for electric utilities in October 2022.
LUCELEC also became the second electric utility member of CCRIF. ANGLEC, Anguilla’s electric utility company, joined CCRIF in 2020 when the electric utilities product covering overhead transmission and distribution was first made available by CCRIF to Caribbean electric utility companies.
The electric utilities policy is designed to limit the financial impact of devastating tropical cyclones by quickly providing financial liquidity to electric utility companies when a policy is triggered.
The policy covers direct damage to the transmission and distribution (T&D) components of the electric power system due to impacts of wind. Like CCRIF’s other policies, the electric utilities policy is parametric, and makes payments based on the intensity of a tropical cyclone and the modelled losses to the company’s T&D infrastructure. Should a policy trigger, payments will be made within 14 days of the event, as with all other CCRIF products. While electric utility companies can access indemnity insurance for its generation facilities, this is not the case for overhead T&D infrastructure which attracts risks that make indemnity insurance either too expensive or not readily available.
Trevor Louisy, managing director of LUCELEC, stressed the importance of this new coverage, stating that:
“Parametric insurance is an ideal solution to further mitigate the significant risk exposure associated with catastrophic weather events. With the increasing intensity of storms and the associated damages left in their wake, as was recently seen in Florida with the passage of hurricane Ian, this risk is increasing. Unlike traditional fire and perils coverage, there is no need for a damage assessment, which can delay the insurance payout and by extension the recovery from the effects of the disaster, for the company and by extension, the country. Parametric insurance is the way to go.”
In welcoming LUCELEC, CCRIF chief executive officer, Isaac Anthony, said:
“At CCRIF we continue to be proud that we are able to provide bespoke insurance solutions – unique and tailored insurance coverage – that is not readily available in the indemnity insurance markets or where pricing is too high and prohibitive.” He also thanked the Caribbean Electric Utility Services Corporation (CARILEC) for working alongside CCRIF to sensitize its members and onboard them as members of the facility.
Executive director of CARILEC, Cletus Bertin responded that he was very pleased that a second electric utility had joined CCRIF and indicated that:
“We are pleased that LUCELEC, an investor-owned utility and ANGLEC, a government-owned utility, are members of CCRIF now. CARILEC is a mix of investor-owned utilities and government-owned utilities in the ratio of about 60:40, and we are very confident that, notwithstanding the sovereign cover that some of these member utility countries might have, this product will bring tremendous benefit to the utility and the sector as a whole. As we all know, electricity is the bedrock of many other sectors operating efficiently and effectively; electricity is needed for not just economic activities but also for the social and cultural life of our people in the region and we well understand the disruption and dislocation that occurs when we are hit with the increasing, and devastating storms and hurricanes.
So, we are very thankful that CCRIF saw it fit to develop this product in collaboration with us and would like to encourage all of our electric utilities to continue the development steps towards signing on to CCRIF. We know that several other utilities are involved in different aspects of engaging with the product – from data modelling to collection of data and submission of datasets.”
CCRIF CEO, Anthony, also stressed the importance of incorporating CCRIF parametric insurance into countries’ and companies’ risk financing strategies:
“CCRIF parametric insurance is an important tool to include in the disaster risk financing strategies of both sovereigns and private sector companies to complement other financing instruments that address different layers of risk and different types of hazard events”.
This was reiterated by Louisy, who commented that “for us at LUCELEC this insurance reduces the risk of failure of our self-insurance fund in the event of a catastrophic weather event”.