Cyclone Ian Triggers First Pacific Catastrophe Risk Insurance Payout

Cyclone Ian triggered the first PCRI payout.

Welcome back to the L&W Investigations liability and insurance news blog. Sure to affect the insurance and liability industry, Cyclone Ian triggered the first Pacific Catastrophe Risk Insurance Payout.

The Pacific Catastrophe Risk Insurance Payout is part of the Pacific Risk Financing and Insurance program (DRFI). The DRFI was designed to help Pacific island countries remain financially stable following natural disasters and includes coverage for damage from tsunamis, earthquakes, and typhoons (cyclones). The program, launched in January 2013, was put to the test for the first time last week when Tonga Ha’apai island group was hit with a category 5 cyclone.

Reports show that Cyclone Ian has displaced thousands, destroyed crops, damaged 75 percent of buildings, and even caused one casualty. Under the Pacific Catastrophe Risk Insurance Pilot, operated by the World Bank, Tonga Ha’apai will receive a $1.27 million payment from the United States that will go toward recovery.

Hn. Dr. ‘Aisake Valu Eke, Minister for Finance and National Planning in Tonga, stated:

the cash received from the catastrophe risk insurance pilot makes an important financial contribution for carrying out the government strategy for mitigating natural disasters, to ensure that response efforts to help the people of Ha’apai recover and their normal everyday lives can continue without interruption or delay.

There are six Pacific island countries participating in the Pacific Catastrophe Risk Insurance Pilot, as well as the Marshall Islands, the Cook Islands, Solomon Islands, Vanuatu, and Samoa. Payouts for damages are based on ‘parametric triggers,’ calculated by a computer model. The model estimates the damages sustained based on several factors, such as the magnitude of an earthquake or the intensity of a cyclone. As the Pacific islands experience frequent natural disasters, disaster insurance coverage is important in order to meet urgent needs and quickly repair and rebuild.


Learn more in The World Bank's press release: http://www.worldbank.org/en/news/press-release/2014/01/23/tonga-to-receive-payout-for-cyclone-response

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