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Press Release
26 February 2007
UK contribution to pilot Catastrophe Risk Insurance Facility for the Caribbean
The UK Government today announced a new US $7.5 million (approximately £3.8m) contribution to the World Bank’s pilot Catastrophic Risk Insurance Facility (CRIF) in the Caribbean, a Facility which provides insurance cover for hurricanes and earthquakes. The announcement was made at a donor pledging conference jointly chaired by the World Bank President, Paul Wolfowitz and Jamaican Minister of Finance, Omar Davies in Washington DC.
This UK contribution will help establish the Facility which will be self-financing and provide participating Caribbean Governments with fast payouts to cover immediate needs for recovery and reconstruction aid following natural disaster. By purchasing insurance from the Facility, Caribbean Governments can contribute to their own protection proportionate to their risk of exposure to natural disasters and help safeguard their services. This in turn will help protect the poor who suffer disproportionately from such disasters, and raise investor confidence in any participating country’s ability to recover from a disaster. At US$890 million, economic damage caused by Hurricane Ivan was twice Grenada’s annual GDP. Ninety percent of the population was affected and the island’s tourism and agriculture industries were virtually devastated.
For those Caribbean countries which chose to take part in the insurance facility, the CRIF will become an integral component of their broader strategy to reduce the devastating consequences of natural disasters which are becoming increasingly frequent due to the effects of climate change. The UK continues to assist Caribbean countries invest in a range of disaster mitigation and planning activities.
UK International Development Minister Gareth Thomas said:
“We are pleased to support this new regional insurance facility which will help Caribbean countries protect themselves against the catastrophic economic, social and environmental costs of natural disasters.
“The poorest and most vulnerable people bear the brunt of natural disasters that can undo progress in a country’s development. In 2004, Hurricane Ivan slammed into Grenada and left 90 per cent of the population homeless. But helping vulnerable countries to help themselves and investing in reducing the impact of future natural disasters will only help to strengthen them. ”
The insurance will be in place for the 2007 Hurricane season and so far 17 countries have signed up to participate. Other donors that will join the UK in contributing to the start-up capital for this Facility include France, Canada and the World Bank.
Notes to editors
1. The CCRIF is a truly innovative regional initiative, bringing private
sector skills, expertise and institutions to work alongside Caribbean
Governments and development partners. It provides insurance cover for hurricanes
and earthquakes. It is hoped both the depth and breath of this Facility will be
expanded in the future.
2. As payments will be for pre-determined amounts and triggered by pre-defined
events (a particular wind speed for example), rather than traditional indemnity
insurance, payments will be made quickly following a disaster, facilitating the
quick launching of recovery operations. The amount of funds disbursed will be
proportional to the magnitude of the disaster, up to a subscribed limit, and the
insurance premiums will be calculated individually fro each country, based on
the estimated risk they face. Initial estimates for the premiums range from
US$0.4 million (Montserrat) to US$3.3 million (Jamaica).
3. As recognised by the recent Stern Review, financing climate change mitigation
and protection against increasingly severe climatic events will require more
effectively tapping into the financial markets and instruments.
4. The proposal meets a number of the UK’s global objectives such as addressing
disaster risk and the impact of climate change. In 2004, following Hurricane
Ivan, the UK provided GBP5.5million in emergency financial support to Grenada
alone.
5. The UK has provided approximately £96 million directly and indirectly to the
Caribbean over the last three years. This includes approximately £36 million
through DFID’s own programmes. The UK also provides financial resources to the
Caribbean Development Bank (CDB) and provides 13% of the total European Union
contribution to the region. In addition to this, the UK make significant
contributions via the World Bank, IMF, UN and Inter-American Development Bank.