Ten Pacific Island countries which are members of the World Bank have a population of about 3.4 million people, scattered across an area equivalent to 15 percent of the globe’s surface, with a development trajectory that will be shaped by their economic geography.
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REGION: EAST ASIA AND THE PACIFICCOUNTRY: PACIFIC ISLANDSFOCUS AREA: FINANCIAL PROTECTIONResults & AchievementsPCRAFI’s Pacific Catastrophe Risk Insurance Pilot is the first parametric c... Show More +atastrophe risk transfer transaction in the Pacific region. Successes and best practices from the PCRAFI pilot have informed discussions for developing a similar risk pooling mechanism in the Indian Ocean Islands. More than $1.2 million was awarded in early 2014 to Tonga, the first country to benefit from an immediate payment,following Cyclone Ian. Participating Pacific Island Countries have obtained an estimated 50% reduction in premiums under the risk pooling mechanism when compared to a country-specific approach.The Pacific Island region is highly vulnerable to natural disasters and climate-related hazards, costing some countries an average of up to 6.6% of gross domestic product (GDP) every year. In response to requests from 15 countries, the World Bank, the Global Facility for Disaster Reduction and Recovery (GFDRR), and other partners formed the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) in 2007 to help mitigate disaster and climate change risk.Under this initiative, the first regional Catastrophe Risk Insurance Pilot (the Pilot Program) was formed and is significantly helping post-disaster response in the Marshall Islands, Samoa, the Solomon Islands, Vanuatu, Cook Islands and Tonga. In 2014, Tonga became the first country to receive a recovery payment following the devastation from Cyclone Ian in January.The 22 Pacific Island Countries (PICs) are among the top 30 nations most vulnerable to natural disasters. Subject to cyclones and tropical storms and prone to volcanic eruptions, earthquakes, and tsunamis, the PICs suffer, on average, combined disaster damages of more than $280 million every year. When a disaster strikes, governments in these countries often struggle to secure liquidity for swift post-disaster emergency response, constrained by their small population, limited borrowing capacity, and access to international markets, as well as the small size of local economies. The pilot program is one component of the Pacific Disaster Risk Financing and Insurance (DRFI) program, which is designed to increase the financial resilience of the PICs against natural disasters as part of the broader PCRAFI umbrella.ApproachThe pilot program is a risk pooling mechanism that allows participating countries to purchase catastrophe coverage as a group at significantly lower cost than the cost of independently purchasing insurance. It was designed: As a solution to short-term cash flow problems that small developing economies face following major disasters that disrupt the provision of government services. With the World Bank acting as an intermediary between the PICs and a group of reinsurance companies. To be the first scheme in the Pacific to trigger payments based on specific physical parameters that are determined beforehand (wind speed, ground movement, etc.).Lessons LearnedInsurance is only one component of comprehensive financial protection. In February 2013, a magnitude 8.0 earthquake and subsequent tsunami hit the Solomon and Santa Cruz Islands without resulting in a payment transfer, as the level of physical damage caused by the disaster was relatively low, as confirmed by the rapid impact assessment undertaken through PCRAFI. This demonstrated the need to better communicate the benefits as well as limitations of the pilot program—for instance, that it covers only a portion of the losses when they disrupt the provision of government services.Partnering programs increase efficiency and effectiveness. This pilot program and the Pacific DRFI program benefit from PCRAFI’s other undertakings, such as work on catastrophe risk information and disaster rapid impact assessments. Financed by the European Union (EU) through the African Caribbean Pacific (ACP) – EU Natural Disaster Risk Reduction Program, an initiative of the ACP Group managed by GFDRR, these efforts are helping refine the models that ultimately benefit applications like the pilot program, enhancing their credibility and attractiveness to the private sector, which is becoming increasingly critical to ensuring resilience in the PICs.Next StepsThe Pacific DRFI Program is seeking additional funding from donors to enable greater participation of low-income countries through the provision of premium subsidies and technical assistance. The continuation of the pilot for at least two more years would stimulate discussion among governments on establishing sustainable sources of finance. Additionally, the establishment of a dedicated entity is under consideration. Show Less -
Moving ForwardThe government’ s response to the recent disaster of tropical cyclone Ian, an order of magnitude larger than the tsunami, is testament to increased capacity in tackling critical re... Show More +construction and recovery . Increased mapping capacity was used to quickly develop robust and high-quality damage maps from post-disaster aerial surveillance to support reconstruction and recovery planning. The building designs used in the project will be replicated and housing reconstruction planning is well advanced, with specific emphasis given to address crucial land tenure issues in a timely manner and with highest political BeneficiariesFe’ao Vakata is from Niuatoputapu. Member of Parliament for the Niuas, he came over as part of one of the first relief teams, bringing clothes and other urgent supplies to the affected communities. He describes what it was like at the time:“From wharf to shore you could see damage and there was no one around. It was like a ghost-town. There was no house that wasn’t affected. All the houses on the right-hand side were gone.”“The community was devastated. You talked to them at the time and everyone cried, even the men. They said it’s not just the wave but the whole sea that came to us. The week after it happened, people refused to come down from the mountain. They stayed in the bush, too scared that another disaster might strike.“The project is about much more than a number,” says Fe’ao. “It is about the joy and happiness of the people.”Uini Limoni is one of those whose family has benefitted from the new homes. “The families are safer now, the children are safe. How can we not be thankful for that?” Show Less -
Bank Group ContributionThe Government of Tonga used both IDA and Government of Australia financing through the Pacific Region Infrastructure Facility (PRIF) to address identified constraints in the To... Show More +nga transport sector. IDA support totaled US$5.44 million, with a further US$ 10.3 million from the Government of Australia. The funding was used to advance ongoing transport sector reforms and initiatives so that the sector can better respond to both current and future national needs safely, securely and sustainably. World Bank and Government of Australia funds were then used to upgrade actual transport infrastructure for land transportation, maritime and shipping, and civil aviation.PartnersAfter the project commenced with IDA funding, it was restructured in 2010 with US$ 10.3 million in funding from the Government of Australia through the Pacific Region Infrastructure Fund. This funding allowed the project to transition from a heavy policy project to one focusing on concrete investments in the transport sector, particularly road safety, road maintenance, and maritime safety. Moving ForwardThe creation of the Ministry of Infrastructure and the establishment of the road maintenance fund, along with major improvements to policy and sector operations are the legacy of the project. These will allow Tonga to continue to develop and efficiently operate its transport sector, improving transport safety. Once infrastructure has been upgraded to a maintainable condition, the need for major donor funding for civil works will not be required.Beneficiaries“Every time we have heavy rains I always pack my family’s belongings and seek higher ground because our house always got flooded. But ever since our main road was fixed we hardly got flooded” - Losaline Latu of Houma Village, near the capital Tongatapu. Show Less -