The Pacific Island catastrophe risk pool managed by the World Bank is working with private sector insurers to develop new programs following the departure of one of the founding country participants
The World’s Bank’s Disaster Risk Financing and Insurance Program (DRFI) is looking to shift its focus in its Pacific Catastrophe Risk Insurance Pilot initiative, according to Samantha Jane Cook, a financial sector specialist with DRFI.
“The new tools are being developed according to the demand from the countries, preliminary discussions have focused on the development of a new regional insurance tool targeted to cover more frequent and less severe events,” Cook said in response to emailed questions. “The discussions with the Pacific Island Countries regarding any new structure are ongoing. We are keen to ensure that any new structure developed is suited to the needs of the countries and their unique disaster risk financing and insurance requirements.”
The changes come following the departure of the Solomon Islands from participating in the facility last year. “[The] Solomon Islands experienced two disaster events which were not eligible for a payout and withdrew from the pilot. This has created the impetus to develop new DRFI tools to cover these layers of risk,” a recently released World Bank review of the program stated.
Cook added that the Solomon Islands “is still involved in the dialogue of the Pacific Disaster Risk Finance and Insurance program” and remains a member of its steering committee.
“It is up to Solomon Islands to decide whether they would like to rejoin the risk pool,” Cooke added. “We would act upon any request to do so.”
The catastrophe reinsurance initiative was created in 2013 a way to transfer sovereign catastrophe risk tied to severe natural disasters like earthquakes and cyclones into the private market. Regional participants include the Republic of Marshall Islands, Independent State of Samoa, Kingdom of Tonga and Republic of Vanuatu.
The first payout was made to Tonga in 2014 for $1.27 million, according to the World Bank.
The pilot has purchased catastrophe risk coverage against events for the 2014-2015 period, according to Cook. Private market reinsurers backing the catastrophe pool include lead reinsurer Sompo Japan Insurance, Mitsui Sumitomo Insurance, Tokio Marine & Nichido Fire Insurance, Alliance Risk Transfer and Swiss Re.
Separately, Cook says that several domestic insurance companies have expressed increased interest in taking advantage of the World Bank’s risk modelling initiative. The Pacific Catastrophe Risk Assessment and Financing initiative was created as a way to offer risk assessment and modelling tools for the region..
“This pilot may create new business opportunities for the domestic private insurance industry to offer parametric insurance to their clients, using the technology developed under the pilot,” Cook said.