WASHINGTON – As scientists warn that climate change will lead to stronger storms, the World Bank is launching on Monday the first disaster insurance plan to offer emergency money to 18 Caribbean countries immediately after they are hit by hurricanes or earthquakes.
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) will allow stricken nations to begin disaster response right away with the guarantee of access to enough money to fund emergency measures.
A meeting of donor countries including Canada, Japan, Britain, France and the European Union in Washington on Monday will seek to raise between $30 million and $50 million in reserves for the regional facility, World Bank officials said.
Until now, it usually has taken months after a catastrophe to raise emergency funds from donor countries. Since 1979, hurricanes have caused more than $16 billion in losses in Caribbean nations, according to World Bank data.
A report by The Intergovernmental Panel on Climate Change warned this month that typhoons and hurricanes would likely intensify in strength due to global warming attributed to climate change.
In 2004, Hurricane Ivan affected eight Caribbean countries, including Granada, whose losses were estimated at $800 million, about two times the size of the island’s economy.
Participating countries in the new program will be from the Caribbean Community and Common Market, or CARICOM, including the Bahamas, Barbados, Grenada, Haiti, Jamaica, Bermuda, Montserrat, St. Lucia, Belize, Trinidad and Tobago, St Kitts and Nevis, Dominica, British Virgin Islands, Anguilla, and the Cayman Islands.
“The facility will allow CARICOM governments to purchase coverage akin to business interruption insurance that would provide them with an immediate cash payment after the occurrence of a major earthquake or the passing of a hurricane,” the World Bank said ahead of the conference.
The insurance will be limited to hurricane and earthquake coverage, the bank said, estimating that major hurricanes can be expected to hit the Caribbean once every 2-1/2 years.
PREMIUMS
To participate in the insurance plan, countries will be required to pay a one-off non-refundable entry fee and an annual premium, which will vary according to a country’s individual risk profile.
Francis Ghesquiere, a senior World Bank urban specialist, said by pooling their risk, countries will be able to reduce individual premiums by some 40 percent.
Annual premiums could vary from $200,000 to $4 million for coverage ranging from $10 million to $50 million, he added.
He said the facility will be established as an independent entity registered in the Cayman Islands and managed by local Caribbean companies.
But it won’t solve all problems. “Countries still need to engage in mitigation and improve territorial building codes and emergency services,” Ghesquiere said.
He said the facility would at first be restricted to governments but could over time be expanded to domestic insurers and possibly other parts of the world.
Caroline Anstey, World Bank director for the Caribbean country management unit, said the bank aimed to establish the insurance plan in time for the next hurricane season in June.
