Natural disaster insurer makes record payout in wake of Haitian earthquake

A Caribbean-based natural disaster insurer is to make a payout of approximately $40 million (£29.2 million) to the Government of Haiti following the devastating magnitude 7.2 earthquake that struck the country on August 14.

The payout represents the full coverage limit under the country’s parametric insurance policy for earthquakes for the 2021/22 policy year.

The insurer, the world’s first regional fund utilising parametric insurance will provide a first tranche of $15 million (£10.9 million) to the Government within one week of the event and the remaining amount of approximately $25 million (£18.2 million) within the 14-day window, to allow for the independent verification of the model results.

It will continue to provide earthquake coverage to Haiti for the remainder of the policy year which ends on May 31, 2022, under a special feature of the earthquake policy known as the Reinstatement of Sum Insured Cover (RSIC). The RSIC, in 2017, provides access to coverage after the maximum coverage limit of a country’s earthquake or tropical cyclone coverage limit has been reached.

Haiti’s Minister of the Economy and Finance, Michel Patrick Boisvert said that the payout will “help finance rapid and tangible government activities geared towards supporting the poor and vulnerable affected by the earthquake in the Grand Sud region”.

In 2010, the Government of Haiti received a payout of $7.8 million (£5.7 million) from the insurer following a 7.0 magnitude earthquake.

Since then, the Government of Haiti has continued to increase its parametric insurance coverage for earthquakes, with the cumulative increase being about 400%.

This increased coverage has been funded through premium support provided initially by the Government of Canada and subsequently by the Caribbean Development Bank, which has paid Haiti’s insurance premiums for earthquakes, tropical cyclones and excess rainfall either fully or in part.

The insurer, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) was founded in 2007 and has made 53 payouts totalling $242.4 million (£176.8 million) to 16 of its 23 members.

The current payout to Haiti will represent CCRIF’s largest single payout to date. Since the Facility’s inception in 2007, it has made 53 payouts. Of these, Haiti has received five payouts totalling US$78.3 million (32 per cent of total payouts).

Haiti received a payment of approximately $343,000 (£250,000) under the Aggregated Deductible Cover, which provides a minimum payment for events that are not sufficient to trigger a country’s tropical cyclone policy, following tropical cyclone Elsa.

CCRIF and the policies it provides are designed to close the liquidity gap following natural disasters and provide governments with a quick infusion of cash to allow them to support their most vulnerable people.

“We continue to closely monitor the overall situation in Haiti, including the passage of Tropical Cyclone Grace and its potential impacts on the country and stand ready to further support our member country and its people in this time of crisis,” CCRIF said in a statement.

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