Next Climate-Related Insurance Round Open for Pacific
Next Climate-Related Insurance Round Open for Pacific Island Countries
The Pacific Catastrophe Risk Insurance Company anticipates a ten-fold increase in premium volume for catastrophe risk insurance it provides to Pacific Island Countries in its sixth season of coverage.
THE COOK ISLANDS, October 17, 2017 – The upcoming insurance season for the Pacific Catastrophe Risk Insurance Company (PCRIC) anticipates a ten-fold increase in premium volume for climate- and seismic-related insurance it provides to Pacific Island Countries. Beginning November 1, 2017, catastrophe risk insurance policies will provide governments coverage against tropical cyclones, earthquakes and tsunamis throughout the year.
PCRIC, a regional catastrophe insurance platform dedicated to the provision of parametric insurance for climate and seismic hazards for Pacific Island Countries (PICs), is designed to quickly give cash payments within 14 days of a triggered event, giving governments immediate access to rapid-response emergency funds. Based on extensive data collection and analyses across the region, catastrophe risk models were developed for 15 PICs by AIR Worldwide – a global leader in catastrophe risk assessments and the key agent that provides independent event reporting. PCRIC, which is owned and directed by participating Pacific Island Countries, is a captive insurance company of the Pacific Catastrophe Risk Insurance Foundation (PCRIF).
“In 2015, our community of Pacific Island Countries called for a regional mechanism to help governments protect people and assets from increasing climate and seismic risks. Within one year, the Pacific Catastrophe Risk Insurance Company (PCRIC) was launched as a regional platform for countries to address climate and seismic hazards, offering parametric insurance for tropical cyclones and earthquakes to quickly payout to governments. PCRIC is actively pursuing new parametric insurance products to meet the priority needs in the region such as excess rainfall and drought.”
Mr. Lavea Tupaimatuna Iulai Lavea, Chair of Council of Members, Pacific Catastrophe Risk Insurance Foundation (PCRIF)
Launched in June 2016, PCRIC is a result
of region-wide efforts to address climate and disaster risks
among 14 Pacific Island Countries. Its roots start from
pilot insurance program that ran from 2013-2015 that was
part of the Pacific Catastrophe Risk Assessment and
Financing Initiative (PCRAFI), which laid the foundation for
a sovereign catastrophe risk pool that offers affordable
parametric insurance. During the pilot phase, parametric
insurance policies were issued to six participating
countries, covering both tropical cyclones and earthquakes/
tsunamis. Two rapid payouts were made to Tonga and Vanuatu,
both within 14 days of a triggered event, providing proof of
concept for a regional insurance mechanism that provides
governments an immediate injection of cash to fund emergency
and disaster response.
At the 2015 Forum Economic Ministers’ Meeting (FEMM), the Ministers of Finance made a collective decision to create the PCRAFI Facility to manage disaster and climate risk finance at the regional level. Ministries of Finance called upon partners for financial and technical assistance to establish a regional facility and capacity building on climate and disaster risk finance, which is supported by the PCRAFI Program and implemented by PCRIC, the Pacific Community (SPC), Pacific Island Forum Secretariat (PIFS), and the World Bank Group’s Disaster Risk Finance and Insurance Program (DRFIP).
To design a regional risk portfolio for the reinsurance market, regional hazard information and national exposure data was aggregated over three years using the open-source geospatial database – Pacific Risk Information System (PacRIS). This provided the requisite inputs to develop a robust catastrophe risk model and produce risk profiles for 15 countries. Using the country risk profiles to create a regional risk pool, a catastrophe insurance program was piloted from 2013-15 among six participating PICs (the Cook Islands, the Marshall Islands, Samoa, the Solomon Islands, Tonga, Vanuatu). From this experience, ministers of finance agreed that pooling risk across all PICs was the most efficient and cost-effective means to design a sovereign insurance mechanism for climate- and seismic-related hazards.