A victory for Shaw - Regional insurance fund chops premiums, hikes coverage
published:
Friday | February 8, 2008
Sabrina N. Gordon, Business Reporter
Audley Shaw, the minister of finance and the public service, led the lobby for changes to the regional insurance fund.Rudolph Brown/Chief Photographer
Caribbean countries, who have lobbied success-fully for more favourable payout terms from their regional insurer, have been granted a 10 per cent cut in premium rates and double the coverage.
It's a double victory for countries, given that in the insurance sector, an increase in coverage normally means more expensive premiums.
Dr Simon Young, CEO of Caribbean Risk Managers and supervisor of the CCRIF, said the fund had a responsibility to remain relevant and responsive to the member governments it was designed to serve.
Young called the facility a "work in progress."
"The new measures are yet another indication that the facility is a dynamic insurance vehicle attuned to the needs of Caribbean governments," said CCRIF in a release.
Comprehensive facility
Audley Shaw, minister of finance and the public service, the chief advocate for the changes in the policy, said member governments would now have access to a more comprehensive facility for the overall benefit of citizens.
"Caribbean nations must implement measures to mitigate risk posed by natural disasters in order to meet their development objectives," said Shaw.
"Still, these measures must be useful and affordable," he said.
The revised terms which will take effect in June will see Jamaica, whose premiums, last year, were US$4 million, paying a reduced US$3.6 million for hurricane and earthquake coverage.
But given foreign exchange rate adjustments in the past year, the savings to the country in Jamaican dollar terms could amount to less than 5.0 per cent, if the current $72 value holds.
Previously, policyholders under the Caribbean Catastrophe Risk Insurance Fund (CCRIF) negotiated premiums proportionate to their risk exposure and capacity to pay.
Insurance fees of US$200,000 to US$2 million could secure coverage between US$10 million and US$50 million.
Increase
At the policy anniversary in June - CCRIF will then be one year old - countries will have access to approximately US$100 million coverage per peril, up from the US$50 million with a minimum payout equivalent to the amount of premiums paid annually when the policy is triggered.
The facility provides coverage for both hurricane and earthquake for 16 member states of the Caribbean with funds of US$75 million up to last July.
CCRIF is the first and only multi-country risk pool insurance facility of its kind in the world, though indications are that the World Bank sponsored facility could be replicated in other regions of the world prone to disasters.
Payouts will also be speeded up
so that legitimate claims can be settled in as little as 14 days, CCRIF said Monday.
The payout is currently spread over a two-phase assessment period and takes as many as 28 days for a country to receive funds when a policy is triggered.
The point at which the policy is triggered for hurricane claims will also be lowered to a 15-year event, moving from a 20-year event.
This means that the countries will be able to claim for catastrophes of smaller magnitude, like a Hurricane Dean.
In fact, the lobby to adjust the policy terms was mounted because of countries' inability to collect on the insurance after Hurricane Dean in August 2007.
Jamaica, for example, which recorded damage of US$350 million (J$24 billion), had to borrow funds from the World Bank to help finance its recovery — adding to the country's loan burden and future debt financing costs, which CCRIF was meant to mitigate.
The fund made its first payout in excess of US$1 million to Dominica and St Lucia in November for damage from a quake measured at 7.4 on the Saffir-Simpson Scale.
