The Pacific Islands’ World Bank supported catastrophe risk insurance facility, the Pacific Catastrophe Risk Insurance Company (PCRIC), is eager to expand its reach to more countries as well as provide coverage against a wider range of perils, according to its Chief Executive Officer (CEO), David Traill.
The PCRIC serves as a parametric disaster and catastrophe insurance captive insurer for the Pacific Island Countries, providing its member countries with a mechanism to secure insurance coverage against tropical cyclones and earthquakes, with backing from the global reinsurance markets.
Currently, five countries are involved in the facility, including Tonga (which recently received a US $3.5mn payout after the impact of Cyclone Gita), Samoa, Cook Islands, Vanuatu, and Martial Islands, but the facility’s CEO recently told RadioNZ’s Dominic Godfrey that expansion is on the agenda.
“Ideally we’d like this to be as large as possible so that we can pool as much risk as possible across the Pacific. If we have scale then that really does lead us to more self-reliance within the Pacific community and that gives us more ability to go in and have conservations with the international markets around, well, this is the stuff we need to pass to you, but this is the stuff we can handle ourselves.
“Obviously, a big part of my role is to go have conversations with other countries and hopefully try and bring them all on board,” said Traill.
And it isn’t just the number of member countries that the entity is looking to grow, but also the risk transfer solutions available to its members, explained Traill.
“In my mind it’s really important that governments have options, because each country is exposed to natural perils in different ways. So, for some people it might be about cyclones, for others it might be about earthquakes, and for others it might be about flood or drought. So, we want to make sure we’ve got options that governments can choose from and balance their portfolio around what they really need, so we can protect our communities as much as possible.
“So, at the moment we are looking at a couple of options around rainfall, especially flooding and drought for smaller countries. Droughts can be quite traumatic because you don’t have the catchment areas, so I’m looking forward to seeing how that product develops,” said Traill.
Recently, the PCRIC announced that it upsized during the renewal of its reinsurance protection, increasing the risk pool by 18% to $45 million with the backing of four major reinsurance companies.
Increasing the pool enables the PCRIC to expand the parametric insurance protection afforded to the five Pacific island nation members, and as it continues to expand its use of reinsurance capacity will grow also.
Ultimately, sovereign parametric catastrophe insurance schemes help governments have some degree of certainty that when major disaster strikes, there is a source of insurance protection that can payout the necessary emergency recovery funding rapidly.
In many cases, parametric insurance payouts can be made long before any aid funding makes its way into disaster hit countries, which is vital to the recovery efforts of poorer, more vulnerable regions in the aftermath of a disaster event.
