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Caribbean Catastrophe Risk Insurance Initiative. Olivier Mahul Program Manager, Insurance for the Poor, World Bank Coordinator, World Bank Catastrophic Risk Insurance Working Group

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Caribbean catastrophe risk insurance initiative

Caribbean Catastrophe Risk Insurance Initiative

Olivier Mahul

Program Manager, Insurance for the Poor, World Bank

Coordinator, World Bank Catastrophic Risk Insurance Working Group

Expert Meeting on Requirements of the Catastrophe Insurance and Weather Risk Management Markets for National Meteorological and Hydrological Services

December 5-7, 2007, WMO Headquarters, Geneva Switzerland

The caribbean catastrophe risk insurance facility
The Caribbean Catastrophe Risk Insurance Facility

The Problem

  • After a catastrophe event governments need money quickly to provide emergency relief and early rehabilitation and keep services running

  • But aid only arrives slowly, often months later

  • Traditional insurance requires proof of loss – again causing timing delays

    The Solution

  • A Facility to provide immediate post-loss liquidity to Caribbean

  • Insurance but based upon defined events allowing rapid payment

  • Caribbean wide to allow benefits of diversification

  • Protected by international reinsurance and capital markets to give stability

  • Backed by donor contribution to guarantee sustainability

Necessary conditions for the emergence and long term viability
Necessary conditions for the emergence and long-term viability

  • Simple instrument

    • Tailored to a specific need

    • Good financial engineering

    • Transparent disbursement rules

  • Political economy

    • One off donor intervention

    • No cross subsidization

    • Peer pressure among countries

    • Local ownership

    • Win-Win-Win deal between clients, donors and reinsurers

Country specific risk modeling

Portfolio of Risk Exposures viability

Portfolio of Risk Exposures

for Wind & Storm Surge

for Wind & Storm Surge

Historical Wind Track Data

Historical Wind Track Data





Storm Surge Hazard

Storm Surge Hazard



Damage and Financial Loss

Damage and Financial Loss

Country-specific risk modeling







From parametric insurance

“Quake in a box” – Tokyo Marine-1997 and Concentric Ltd (Tokyo Disneyland) 1999

Payoff based on earthquake magnitude > Magnitude occurring within a region defined by boxes or circles

From parametric insurance…

Parametric Re

Concentric Ltd.

To parametric index insurance
To parametric index insurance Ltd (Tokyo Disneyland) 1999

Hurricane path and calculated wind speeds
Hurricane path and calculated wind speeds Ltd (Tokyo Disneyland) 1999

  • Obtain Hurricane parameters from the National Hurricane Center

  • Calculate wind speed at each of the four locations

  • Calculate wind index at each location

  • Sum the four values to calculate event index

  • Loss recovery = ((Event Index- attachment)/Layer) * contract amount

  • 1 Port and manufacturing

  • ( 125 MPH)

* 3 Tourism

(95 MPH)

*2 Capital

(130 MPH)

*4 Tourism

( 145 MPH)

Designing hurricane loss index
Designing Hurricane Loss Index Ltd (Tokyo Disneyland) 1999

Loss deficit curve for Jamaica

Index calculation locations and weights for Jamaica

Catastrophe insurance pool
Catastrophe Insurance Pool Ltd (Tokyo Disneyland) 1999

Ccrif risk financing capacity
CCRIF risk financing capacity Ltd (Tokyo Disneyland) 1999

2007-08 CCRIF Portfolio - Loss Exceedance Curve

The CCRIF can sustain a 1-in-1000 year adverse event

Ccrif next steps
CCRIF - Next steps Ltd (Tokyo Disneyland) 1999

  • Product refinement

    • Lowering the minimum hurricane attachment point for a 20 year RP to a 10-15 year RP

  • New coverage under investigation

    • Flood coverage

    • Agricultural parametric insurance

Next steps pacific catastrophic risk pool
Next Steps: Pacific Catastrophic Risk Pool Ltd (Tokyo Disneyland) 1999

  • Request from the Pacific island states

  • Challenges

    • Technical challenges

      • Data collection (perils and assets)

      • Catastrophic risk modeling

      • Simple instrument tailored to specific needs

    • Operational challenges

      • Governance structure

      • Management structure

      • Legal structure

    • Financial challenges

      • Competitive pricing through a cost-effective combination of collective reserves and reinsurance

      • Pricing reflecting country-specific risk profile

      • Sustainable risk financing strategy

    • Institutional challenges

      • One off donor intervention

      • Peer pressure among participating countries

      • Local ownership

      • Interest for all the parties (clients/donors/reinsurance industry)