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Caribbean Catastrophe Risk Insurance Project

September 10, 2013


A hurricane approaches the coast in Belize. The Caribbean region is highly vulnerable to natural disasters.

The Caribbean Catastrophe Risk Insurance Facility Project was efficiently implemented contributing to an effort to reduce financial vulnerability through allowing Caribbean countries to access natural catastrophe risk insurance at affordable rates. As such, the project financed the establishment and operation of the CCRIF through reimbursement of major operational expenses and claims within its risk retention during its first four years.

Large economies can absorb the economic impact of major disasters, as the resulting damage, however large in absolute terms, is equal to a small share of GDP. The same cannot be said of small island economies, such as in the Caribbean, where the damage can easily constitute a multiple of GDP. The capacity of the Caribbean countries individually to absorb the financial impact of such disasters is limited by a number of factors.  Their small geographic size prevents diversification of their risk.  The modest scale of their fiscal revenues makes establishing a financial reserve unaffordable and their small budgets constrain opportunities for reallocating resources to meet immediate needs. The high levels of their government debt constrain their access to credit in international capital markets and their domestic capital markets lack sufficient depth to meet their needs following a catastrophe.  And, finally, donor assistance they may receive to support relief and recovery, with the exception of in-kind humanitarian assistance, comes with a delay, and often results from a reprogramming that reduces funds for other development activities, and is normally tied to specific expenditures.


The World Bank already had a significant history of experience with supporting efforts of countries in the Caribbean and elsewhere to strengthen their disaster risk management strategies and recover from hurricanes and earthquakes. In view of this history, following the devastation caused by Hurricane Ivan and the other major tropical cyclones in 2004, the Caribbean Community and Common Market (CARICOM) Heads of State requested the World Bank’s assistance in devising and creating a structure that would help the Caribbean countries address the constraints described above by providing them with access to affordable insurance coverage against potential revenue losses from natural disasters, thereby reducing their financial vulnerability to such disasters.


Through the establishment and operation of the CCRIF Caribbean countries’ financial vulnerability to earthquakes and hurricanes has been reduced:

  • The trust fund successfully supported CCRIF’s establishment and operations by reimbursing it for major operational expenses, reinsurance costs, and claims paid within its risk retention during its first four years.  MDTF support enabled CCRIF to retain more of its premium income than would otherwise have been possible, thus accelerating its trajectory towards becoming a financially sustainable, self-standing insurance provider.  For 2011-2012, CCRIF had the capacity to pay $150 million in claims, associated with a series of catastrophes of such large magnitude that they are expected to occur only once in every 1,401 years.  With CCRIF’s assets over and above US$25 million, it could withstand an even more severe series of events with a modeled probability of occurring only once in every 10,000 years.
  • By both of these measures (dollar amounts and frequency of disaster), CCRIF’s claims paying capacity by far exceeds expectations.  The target for CCRIF’s end-of-project claims paying capacity was set in the ISRs at US$110 million, versus the US$150 million achieved for 2011-2012, while the expectation in terms of return period was one in 200 years, versus the one in 1,401 years achieved with reinsurance and US$25 million of CCRIF’s own resources.
  • The 16 Caribbean countries and territories that joined CCRIF in 2007 purchased 29 policies, which they have since renewed annually.  Coverage that they have obtained from these policies rose by 26.2 percent from an aggregate of US$494.8 million in 2007-2008 to US$624.4 million in 2011-2012.  These policies have provided them with a hedge against the financial risk associated with earthquakes and hurricanes and the certainty of timely support in the event of a disaster of sufficient magnitude to trigger the policy.
  • The seven CCRIF members that have been affected by covered disasters received the additional financial benefit of a rapid infusion of liquidity into their general budgets at a crucial time of particular need.  Such budget support has totaled US$32.2 million to date. 

Bank Contribution

The total amount contributed to the Multi-donor Trust fund was US$67.4 million of which US$10 Million was financed by IBRD. Other contributing donors were CDB, European Commission, DFID, French Republic, Canada, Bermuda and Ireland. With net interest income, the MDTF resources grew over time to US$ 70,997,902.39.


CCRIF will continue its partnerships with other Caribbean institutions, bilateral donors, and the World Bank with a view to helping to strengthen disaster risk management in the Caribbean. 

Moving Forward

CCRIF’s next important institutional step is to market its excess rainfall product.  The product was launched in the 2012-2013 financial year, the availability of this product is expected to lead to some expansion of CCRIF’s membership.  In addition, CCRIF is working with the Munich Climate Insurance Initiative (MCII) to develop parametric micro and portfolio insurance products of two sorts, which are expected to be piloted in three CCRIF countries:  Grenada, Jamaica, and St. Lucia.  The first would be a livelihood protection product for small scale producers and businesses that would provide payouts following weather-related natural disasters of pre-determined magnitudes in order to offset a portion of their income and other economic losses from the disasters.  The second would be a product for institutions such as credit unions and development banks that have significant portfolios of loans to individuals and micro, small, and medium-sized enterprises.  The product would provide coverage to the credit institutions against the risk of losses in its portfolio due to defaults arising from the impact of weather-related events on the borrowers’ debt service capacity.


The primary beneficiaries of CCRIF are the 16 member governments.  They benefit from:  (i) being able to transfer a portion of their hurricane and earthquake risk to the Facility at a price lower than what they would pay if they were able to obtain coverage individually in international insurance markets; and (ii) from receiving a prompt cash payout following a covered event.   A secondary benefit is a more favorable investor sentiment, particularly in the tourism sector, stimulated by investors’ greater confidence in the governments’ disaster risk management strategy and ability to overcome quickly the damage caused by the disaster. A number of officials from member country agencies – e.g., ministries of finance, departments of insurance supervisors, national disaster management offices, and national meteorological and hydrological services (NMHS) – have benefited from CCRIF’s support for their participation in a range of professional development activities sponsored by CCRIF itself or by others. Finally, undergraduate and graduate-level students have benefited from CCRIF scholarships for studies in insurance, disaster risk management, civil and environmental engineering, geology and geography, and related fields