As from November 1, 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 insurance for climate and seismic hazards for Pacific Island countries, 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 providing independent event reporting.
Launched in June 2016, PCRIC is the result of region-wide efforts to address climate and disaster risks among 14 Pacific Island countries. It stemmed from a pilot insurance programme that ran from 2013-2015 and was part of the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI).
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 cyclone, 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, the ministers of Finance made a decision to create the PCRAFI facility to manage disaster and climate risk finance at regional level.
Ministries of Finance in the countries involved called upon partners for financial and technical assistance to establish a regional facility and capacity building on climate and disaster risk finance, supported by the PCRAFI programme and implemented by PCRIC, the Pacific Community (SPC), Pacific Island Forum Secretariat and the World Bank Group’s disaster risk finance and insurance programme.
To design a regional risk portfolio for the reinsurance market, regional hazard information and national exposure data was built up over three years using the geospatial database Pacific Risk Information System.
This provided the inputs to develop a strong catastrophe risk model and produce risk profiles for 15 countries.
Using the country risk profiles to create a regional risk pool, a catastrophe insurance programme was piloted from 2013-15 among six participating Pacific Islands countries including the Cook Islands, the Marshall Islands, Samoa, the Solomon Islands, Tonga, and Vanuatu.
From this experience, ministers of finance agreed that pooling risk across all Pacific Islands countries was the most efficient and cost-effective means to design n insurance mechanism for climate and seismic-related hazards.