I read a news story back a few months which I thought was pretty cool. The government of the Pacific Island country Tonga had received a $3.5 million pay-out from a captive, the Pacific Catastrophe Risk Insurance Company (PCRIC), following Cyclone Gita that struck the islands on February 12, 2018.
The PCRIC offers member countries parametric insurance which is designed to payout within 10 days after a triggering event, providing those in need with valuable funds very soon after an event occurs. Something this vital for vulnerable regions when addressing the impacts of natural disasters and climate-related events. The PCRIC purchased reinsurance from four international reinsurers, with additional capital contributions from the Multi-Donor Trust Fund, which includes contributions from Germany, Japan, the U.S., and the UK, and is managed by the World Bank. Sure enough, funds from the program were transferred after seven days of the cyclone event, providing the Tongan government with appropriate financing to support disaster-relief efforts and effective service delivery to the affected areas.
Gita reached its peak intensity as a Category 4 cyclone before making landfall on Tonga on February 12, where its destructive wind strength caused wide spread damage. PCRIC chief executive David Traill said, “It is clear that the increased level of coverage provided to Pacific Island countries through the establishment and capitalization of PCRIC by our donor partners has made a positive impact on the support we are able to deliver to the Pacific Island region.”
To me, this story reinforces the growing recognition of climate change and related severe weather events to the insurance world. I believe captives can and will play a more important role as the world confronts this problem. At the upcoming VCIA Annual Conference August 7-9 there will be a terrific session called Natural Catastrophes and their Impact on Risk Management, which will feature the following experts sharing information on the potential impact of natural catastrophes on risk management:
- Gillian Galford, an Earth Systems Scientist at the University of Vermont and lead author of the Vermont Climate Assessment
- Howard Kunst, Senior Modeler and Chief Actuary, at CoreLogic
- Jason Shafer, Professor of Atmospheric Sciences at Lyndon State Colleges, who focuses on the valuation of weather information within the private sector
- John Ferrara, FCAS, MAAA, senior manager at Ernst & Young
Register soon at www.vcia.com to get the best rates! Early rates expire June 30th. We look forward to seeing you in Vermont in August. Thank you all very much!