Regional Water Utilities Now Have Access to Insurance Coverage Against Extreme Weather Events

GRAND CAYMAN, Cayman Islands – The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) says water utilities in the Caribbean will now be able to access parametric insurance coverage to financially protect them against extreme weather events such as hurricanes, tropical storms, and excess rainfall events.

It said the Caribbean Water Utility Insurance Collective (CWUIC) has been established as a segregated portfolio (SP)2 within CCRIF.

CCRIF is the world’s first multi-country, multi-peril risk pool providing parametric insurance and offers products to 19 Caribbean governments, four Central American governments and three Caribbean electric utilities.

It also offers five parametric insurance products  for tropical cyclones, excess rainfall, earthquakes, for the fisheries sector and the electric utilities sector for transmission and distribution. The water utilities product will be CCRIF’s sixth parametric insurance product on offer.

“CWUIC benefits from CCRIF’s 16-year experience of offering parametric insurance policies to provide coverage against natural hazards to governments as well as Caribbean electric utility companies,” said CCRIF chief executive officer, Isaac Anthony.

“With CWUIC, CCRIF continues to leverage its state-of-the-art parametric insurance base models – tropical cyclone and excess rainfall – to produce models and products for key economic sectors that are usually not able to access affordable insurance coverage against natural hazards,” he added.

CCRIF said that CWUIC SP has been in the making for the last two years, with the Inter-American Development Bank (IDB) providing technical and financial support for the structuring and CCRIF undertaking the modelling work to develop the insurance model that will underpin the water utilities insurance product.

Other key partners in this initiative are the United Kingdom Foreign, Commonwealth and Development Office (FCDO), and the Barbados-based Caribbean Development Bank (CDB). A total of US$8.45 million of grant resources has been mobilized for CWUIC SP, including US$7.8 million from the IDB, of which US$5.6 million was provided by the British government through the FCDO.

It is also providing premium subsidies for the insurance coverage to water utilities in six Caribbean countries. CDB has approved grant funds of US$650,000 in technical assistance.

Approximately 35 water utilities in 29 territories in the Caribbean have been identified as potential clients for CWUIC SP.

CCRIF said that the vision for CWUIC goes beyond insurance and it has been designed as a center of excellence for disaster risk management and financing for water utilities and has three components, namely to support to water utilities in emergency response planning and restoring and rebuilding post-disaster as well as provide parametric insurance to help water utilities to respond to and recover from natural disasters.

In addition there is the provision of advisory services and technical assistance to identify and structure priority projects to build water and wastewater utilities’ resilience to natural hazards. Under this component, the IDB received US$500,000 from the Coca-Cola Foundation to conduct feasibility studies on water utility projects that promote resilience.

“The people of the Caribbean are on the frontline of natural disasters, which are increasing in frequency due to climate change. This first-of-its-kind scheme will enable Caribbean countries to maintain essential services in the face of storms and floods, while greatly reducing the financial burden on individual governments,” said UK Minister for the Americas and Caribbean David Rutley.

“The UK is determined to play its part in helping small island developing states build resilience to extreme weather events with access to fairer and reliable funding.”

CDB’s Vice President of Operations, Isaac Solomon said the story of CWUIC SP’s development is one of donor collaboration in response to an expressed demand from utilities and endorsed by regional governments.

“CDB has been an integral part of the Working Group that designed and established CWUIC SP, acknowledging that the water utilities in all our Borrowing Member Countries (BMCs) should have access to this facility.

“For this reason, CDB has committed additional resources to extend the analytical work required to provide coverage to all BMC water utilities. CDB believes that CWUIC SP is uniquely positioned to change the lives of Caribbean people by enabling water utilities to maintain business continuity following a natural disaster – a time when the role of water becomes critical to clean-up efforts, healthcare and basic human needs,” he added.

CCRIF said that access to quick liquidity following a natural disaster will be key for water utilities as this will ensure that they will be able to restore water supply in the shortest possible time.

“In fact, several years ago, a payout to one of CCRIF’s members in the Eastern Caribbean under their tropical cyclone insurance policy was used to quickly repair that country’s main water treatment plant which was a feeder for other plants on that island.

“A dedicated disaster risk financing and management facility for the water and wastewater sector will bring immeasurable benefits and dedicated resources for water utilities to respond to their most pressing needs following a natural disaster.”

CCRIF said it is committed to providing payouts within 14 days after a member’s policy is triggered, and since its inception in 2007, CCRIF has made 60 payouts totaling US$261.8 million to 16 of its member governments.