CCRIF pays out to islands hit by Hurricane Tomas

(CNS): The regional insurance policy which covers countries in the Caribbean from natural and man made disasters in the Caribbean Catastrophe completed payments onWednesday to the governments of Barbados, Saint Lucia and St. Vincent & the Grenadines in the wake of Hurricane Tomas. The Caribbean Catastrophe Risk Insurance Facility (CCRIF), which is domiciled in the Cayman Islands, had released 50% of the payouts on 7 November week after the storm’s passage at the request of the three countries for urgent restoration of services. The total payouts for the three countries were Barbados – US$8,560,247; Saint Lucia – US$3,241,613 and St Vincent & the Grenadines – US$1,090,388.

Hurricane Tomas resulted in significant damage to the three islands, with Saint Lucian officials reporting that Tomas was “the worst in Saint Lucian history, destroying the island’s entire banana crop.” Across the three islands, roads and houses were damaged, power lines downed and the agriculture sector heavily impacted.

The three countries – along with 13 other Caribbean nations – have had catastrophe insurance for hurricanes and earthquakes with CCRIF since the inception of the Facility in 2007. CCRIF was formed at CARICOM’s request for a cost-effective risk transfer programme for member governments, and the insurance policies now form part of these countries’ disaster risk management frameworks.

CCRIF offers parametric insurance and therefore payouts can be calculated and made very quickly because there is no need to estimate damage after an event, the organisation stated in a release about the payout.

Payouts for tropical cyclones are determined based on government losses calculated using storm data from the National Hurricane Centre and parameters fixed within the loss estimation model used to underpin CCRIF’s policies. The model calculates the level of wind and ocean hazards, such as storm surge, encountered across the affected area and uses the pre-fixed value and distribution of government exposures to those hazards to calculate a loss.

The specific payout totals are based on the level of coverage a country has. Each individual country chooses its own coverage options in terms of the attachment point (deductible), exhaustion point (coverage limit), and premium. The amount of the premium then dictates how much of the risk between the attachment and exhaustion points they are actually covered for.

In the wake of Hurricane Paloma in 2008 questions were raised about the effectiveness of the policy in the Cayman Islands when there was no payout for Cayman Brac despite the devastation caused by the storm on that island. The policy covers the areas of economic activity and it was calculated that had Paloma hit Grand Cayman the payout could have been as much as $40 million.