Govt negotiates catastrophic risk insurance zoning

The Nassau Guardian:  

The government has successfully negotiated the zoning of The Bahamas with the CCRIF SPC (formerly Caribbean Catastrophic Risk Insurance Facility), which will allow this country to claim from the insurance scheme based on catastrophic damage sustained in each zone separately.

Deputy Prime Minister Peter Turnquest told Guardian Business yesterday that The Bahamas will now be insured with the CCRIF SPC in three zones, north, south and central, “with different premiums and attachment points for each zone”.

“We were successful in having them segregate The Bahamas into three regions,” said Turnquest.

“This will allow for a more relevant and fair assessment and payout after an event, as the attachment point for each zone reflects the risks to infrastructure in that area.”

Turnquest said the breakdown of the premiums and attachment points will be discussed in detail during the 2018/2019 budget debate next month.

Government met with CCRIF SPC in Miami last month in order to secure an agreement with the body, to allow The Bahamas to purchase parametric insurance to cover damage from hurricanes by zone instead of as one jurisdiction.

Turnquest told this paper recently that government is also looking at other options to cover The Bahamas in case the islands are hit by a major storm. He said government is looking at green bonds and other private insurance options to ensure the country can cover its losses following a catastrophic storm.

Several major hurricanes are predicted for the Atlantic hurricane season, which begins in a little more than a month.

Government has also started a disaster fund, and attained a contingency loan from the Inter-American Development Bank in case of a disaster.

Turnquest said the parametric insurance with CCRIF SPC will mean lower payment thresholds in the less dense areas of The Bahamas, where damage costs will likely be minimal compared to highly populated New Providence.

The Bahamas paid a premium of $2.8 million to CCRIF SPC in the 2017/2018 budget year. Because The Bahamas did not meet the attachment point that would trigger a payment based on CCRIF SPC’s models, the country did not receive one. It did, however, receive $397,598 based on the CCRIF SPC’s aggregate deductible cover – a new offer of the insurance scheme.

Had The Bahamas purchased a policy for the 2016/2017 year, the payout from CCRIF based on both the tropical cyclone and excess rainfall policies would have been more than $32 million. This would have been the case because based on the CCRIF’s models The Bahamas after Hurricane Matthew would have exceeded losses greater than the policy’s exhaustion point of $712,849,507.

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