World Bank to offer catastrophe risk insurance to Caribbean countries

Thanks to donor countries such as Canada, the World Bank is expected to be able to offer catastrophe risk insurance to 18 Caribbean countries in time for the 2007 hurricane season.Associated Press has reported officials from Caribbean nations are meeting in Washington on Feb. 26, 2007, to discuss the World Bank’s new Catastrophe Risk Insurance Facility (CCRIF).A meeting of donor countries, including Canada, Japan, Britain, France and the European Union will also take place. Donors will be asked to raise between US$30 million and US$50 million in reserves for the regional facility, AP reports.Hurricanes have caused more than US$16 billion in losses in Caribbean nations since 1979, according to World Bank data.A posting on the World Banks Web site says insured Caribbean countries would pay an annual premium in proportion to their own risk exposure. As an example, annual premiums may vary from US$500,000 to US$2 million for payouts from US$20-80 million, the World Bank notes.Insurance offered through the proposed Caribbean would provide immediate budget support to the government in order to cover the liquidity gap during the first few months of a disaster, the World Bank says. It is not intended to cover all reconstruction costs and countries will still depend on other sources of financing, including donor assistance.In addition to the risk capital that would be provided by doner countries, reinsurance would be purchased to cover the risk beyond the capacity of the facilitys capital. Facility risk capital is important as it will help smooth the underwriting cycle and ensure optimal reinsurance purchase, leading to lower insurance premiums paid by participating countries, the World Bank says.