Cayman Islands-based CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) announced that Trinidad & Tobago will receive a payout of US$7,007,886 (approximately TT$47.4 million) on an excess rainfall policy following a period of heavy rainfall between Oct. 18 and Oct. 20, 2017.
CCRIF was able to determine the value of the payout after the end of this rainfall event and the payout will be made to the government within 14 days of the ending of the event.
Trinidad & Tobago has been a member of CCRIF since 2007 and has purchased CCRIF policies for tropical cyclone and earthquake since 2007. In recent years, Trinidad & Tobago has experienced severe hydrological events not associated with hurricanes, resulting in major flooding and loss of property and livelihoods.
This year, for the first time, the government purchased a CCRIF policy for excess rainfall (XSR) and has two separate XSR policies in place – one for Trinidad and one for Tobago. Following the recent heavy rainfall, the policy for Trinidad triggered.
CCRIF insurance products for earthquakes, tropical cyclones and excess rainfall are parametric and make payments based on the intensity of an event (for example, earthquake intensity, hurricane wind speed, volume of rainfall) and the amount of loss calculated in a pre-agreed model caused by these events, CCRIF explained in a statement.
In the case of rainfall, losses are estimated using a model based on amount of rainfall, CCRIF said, noting that hazard levels are then applied to pre-defined government exposure to produce a loss estimate.
Payout amounts increase with the level of modeled loss, up to a pre-defined coverage limit. Therefore payouts can be made very quickly after a hazard event – and in the case of CCRIF, within 14 days after the event. This is different from traditional insurance settlements that require an on-the-ground assessment of individual losses after an event before a payment can be made – a process that can often take months or even years.
Local officials and technocrats in Trinidad have referred to the recent rainfall, which has caused widespread flooding, as “unprecedented.”
The CCRIF payout will provide quick liquidity to the government for immediate repairs and recovery efforts. Countries need to be mindful that CCRIF was not designed to cover all the losses on the ground – but rather to allow governments to reduce their budget volatility and to guarantee sufficient capital for emergency relief, said CCRIF.
This payout to the Government of Trinidad & Tobago brings the total CCRIF payouts in 2017 to approximately US$61.5 million, which includes US$30.8 million for Hurricane Irma and US$23.6 million for Hurricane Maria.
Since the inception of the facility in 2007, CCRIF has made payouts totalling US$123.5 million to 12-member governments – all made within 14 days of the event. This payout to Trinidad will bring total payouts to US$130 million. These monies usually represent the first injection of liquidity to countries affected by catastrophe events.
Source: CCRIF SPC