Swiss Re is among the insurance industry players signed on to a public-private partnership to provide a catastrophe risk insurance program for several Pacific island countries.
The Pacific Catastrophe Risk Insurance Pilot program, launched last Friday, provides protection for The Marshall Islands, Samoa, Solomon Islands, Tonga and Vanuatu.
Japan, the World Bank and the Secretariat of the Pacific Community (SPC) have teamed up with those Pacific island countries for the pilot, which “will test whether a risk transfer arrangement modeled on an insurance plan can help Pacific island nations deal with the immediate financial effects of natural disasters,” according to a statement from the World Bank.
“This joint effort will allow Pacific island nations to access earthquake and tropical cyclone catastrophe coverage from reinsurance companies at an attractive price,” the statement notes.
“The Pacific Catastrophe Risk Insurance Pilot is the first of its kind in the Pacific. This is an excellent opportunity to see whether insurance might work for Pacific island countries and to explore options for financing disaster responses in the future,” said Dr. Russell Howorth, Director of the SPC Applied Geosciences and Technology Division.
Sompo Japan Insurance, Mitsui Sumitomo Insurance, Tokio Marine & Nichido Fire Insurance and Swiss Re are the insurance and reinsurance companies involved in the pilot program, while AIR Worldwide is providing the underlying risk modeling.
“If a natural disaster strikes any of the five countries, a modelled loss approach will be used to quickly approximate the damage on the ground and trigger the payout under the programme,” Swiss Re explains. “The project is currently in its pilot stage and will expand to include more Pacific Island States as it grows.”
Pacific islands are especially vulnerable to natural catastrophes, Swiss Re says. The reinsurer points to Tropical Cyclone Evan, which made landfall in December, as just one example of a disaster that has hammered the region.
The pilot program iis part of the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), a joint initiative of the World Bank, SPC, and the Asian Development Bank, with financial support from the Government of Japan, the Global Facility for Disaster Reduction and Recovery (GFDRR) and the European Union.
Launched in 2007, that program aims to provide the Pacific island nations with disaster risk assessment and financing tools for enhanced disaster risk management and climate change adaptation, according to the World Bank.