Mitigating catastrophe risk in the Caribbean

The 7.4 magnitude earthquake which struck the Caribbean on 29 November and which caused property damage from Trinidad northwards to Dominica highlighted the existence of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) launched in June, 2007 with the support of the World Bank and the international donor community. Provisional calculations by Caribbean Risk Managers Ltd, in their role as Supervisor of the CCRIF, suggest that two CCRIF member countries, Dominica and Saint Lucia, will likely receive a payment from the Facility, the quake having been of sufficient magnitude to trigger their parametric policies. The CCRIF is operated by regional insurance brokers, the CGM Group, through their risk management company, CaribRM. Here, Dr Simon Young, chief executive of CaribRM, outlines the structure and objectives of the CCRIF

Among the challenges facing the governments of small island states in the aftermath of natural disasters is the need for short-term liquidity to start recovery efforts while maintaining essential government services. This challenge is particularly acute for Caribbean governments whose economic resilience is limited by the combination of substantial vulnerability and high levels of indebtedness. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) was established as a joint reserve fund to provide participating CARICOM governments with an insurance instrument to address this need. This instrument, akin to business interruption insurance, provides member governments with short-term liquidity if hit by a major hurricane or earthquake.