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Emergency Insurance Directs $11 Million Rush Payout to Bahamas

Eric Roston
Emergency Insurance Directs $11 Million Rush Payout to Bahamas

(Bloomberg) -- The Bahamas will receive $11 million in post-disaster insurance from a novel 12-year-old regional coverage program.

CCRIF, once short for the Caribbean Catastrophe Risk Insurance Facility, was established in 2007 to provide funds for countries hit by cyclones, earthquakes or extraordinary rainfall. The segregated portfolio company is an example of parametric insurance,  designed to make immediate injections of money in the wake of a catastrophe. Funds are deployed within two weeks of a disaster and are based not on after-the-fact damage assessments—which can take months—but on metrics predetermined by a country’s particular risk.

Those payments “are usually used for the most immediate needs,” said Leonardo Martinez-Diaz, global director of the nonprofit research group World Resources Institute’s Sustainable Finance Center. “Keeping airports open, clearing debris from roads, paying nurses and law enforcement—the key elements that are under threat in immediate aftermath of a disaster like this.”

WRI on Wednesday published an assessment of how sovereign parametric insurance, which is purchased by governments, is faring as climate change supercharges natural disasters.  

The programs are helping, the researchers found. With the latest disbursement, CCRIF has paid out about $150 million to 13 countries since its launch in 2007. Haiti received $20.4 million in the immediate aftermath of Hurricane Mathew, which killed more than 500 people there in October 2016. Dominica received $19.3 million in 2017 after Hurricane Maria, where at least 31 people died. The remainder of the fund’s 39 payouts have been for smaller amounts, ranging from hundreds of thousands to single-digit millions of dollars.

Such sums are not sufficient to protect nations from harm and help them recover, according to the WRI report. Parametric risk should be deployed as part of a “risk-layering” approach that includes private insurance, foreign aid, concessional loans and national recovery funds, the researchers find. The report also reviewed African Risk Capacity, a program begun in 2012 to pool resources for drought coverage, and the Pacific Catastrophe Risk Insurance Company, which started in 2016 to help with climate and earthquake risks.

The Bahamas, which has bought insurance from CCRIF since its launch, is one of 21 nations that pool their capital and risk into the organization. CCRIF has worked with members in recent years to lower its premiums in an effort to make participation in the pool more sustainable. Since its inception, coverage has extended beyond Caribbean governments into Central America. The details of each country’s policies are undisclosed.

Hurricane Dorian has killed at least 30 people on the island, with many more feared.

(Updates with insurance payout from first paragraph.)

To contact the author of this story: Eric Roston in New York at eroston@bloomberg.net

To contact the editor responsible for this story: Joshua Petri at jpetri4@bloomberg.net

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