Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines are expected to be able to reduce their financial vulnerability to natural disasters such as earthquakes and hurricane through access to the Caribbean Catastrophe Risk Insurance Facility (CCRIF) with financing of catastrophe insurance coverage from the facility to be established in March.
Following the devastation caused by hurricanes in the Caribbean in 2004, the CARICOM Heads of State requested World Bank assistance with gaining access to affordable and effective disaster risk financing instruments.
And in January 2006, with grant funding from the Government of Japan, the World Bank initiated the preparatory studies for the establishment of the CCRIF, a project document stated. This facility will allow small states to purchase insurance coverage against potential revenue losses from hurricanes and earthquakes.
The World Bank Group is currently working with governments and donor partners on the development of the CCRIF. The highly technical and specialized nature of setting up the facility made it necessary to utilize a wide spectrum of World Bank experts to tackle the legal, fiduciary, and catastrophe risk financing aspects of the initiative.
The proposed project aims to provide the borrowers with insurance coverage against natural disasters. The project will finance the entrance fee and the annual insurance premiums for three years necessary to participate in the CCRIF. The coverage provided would help countries face immediate liquidity needs emerging from the occurrence of a disaster.
The project will include the payment of an entrance fee, estimated to be US$1.286 million, and payment of annual insurance premiums for the first three years at approximately US$1.286 million for the first two years and US$.642 million in the third year.
Being aligned on a North-South axis, the four countries provide significant opportunity for risk diversification among the facility. According to the project document, inclusion of all four countries will have a positive impact on the efficiency of the instrument, promoting participation throughout the region and eventually improving the overall sustainability of the facility.
Implementation
The credit proceeds will be transferred on an annual basis from the International Development Association (IDA) to the CCRIF account at the request of each country’s Ministry of Finance. To obtain funds, the Ministry of Finance will submit a withdrawal application for the value of the entry fee and/or premium. This exercise will be completed in February 2007, 2008 and 2009.
Once formalized the CCRIF would be an independent legal entity acting as an intermediary between the participating countries and the international financial markets. The facility would be managed by a Manager under the supervision of a Board of Directors comprised of representative donors and client countries.
