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    S2 ASEAN DRFI Forum CCRIF Nov3

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    Asean Drr Portal
    The document discusses regional catastrophe risk pooling vehicles and their potential application in ASEAN countries. It provides details on existing risk pooling facilities like the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and efforts underway in the Pacific through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). The CCRIF allows Caribbean governments to access quick payouts after disasters through a joint reserve mechanism based on parametric insurance. Key lessons from CCRIF include the need to identify country needs, design simple insurance instruments, and create political will and local ownership. The document raises whether similar regional risk pooling vehicle(s) could help ASEAN countries finance natural disasters.

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    S2 ASEAN DRFI Forum CCRIF Nov3

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    Asean Drr Portal
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    The document discusses regional catastrophe risk pooling vehicles and their potential application in ASEAN countries. It provides details on existing risk pooling facilities like the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and efforts underway in the Pacific through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). The CCRIF allows Caribbean governments to access quick payouts after disasters through a joint reserve mechanism based on parametric insurance. Key lessons from CCRIF include the need to identify country needs, design simple insurance instruments, and create political will and local ownership. The document raises whether similar regional risk pooling vehicle(s) could help ASEAN countries finance natural disasters.

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    S2_ASEAN_DRFI_Forum_CCRIF_Nov3

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    The document discusses regional catastrophe risk pooling vehicles and their potential application in ASEAN countries. It provides details on existing risk pooling facilities like the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and efforts underway in the Pacific through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). The CCRIF allows Caribbean governments to access quick payouts after disasters through a joint reserve mechanism based on parametric insurance. Key lessons from CCRIF include the need to identify country needs, design simple insurance instruments, and create political will and local ownership. The document raises whether similar regional risk pooling vehicle(s) could help ASEAN countries finance natural disasters.

    Copyright:

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    22 views18 pages

    S2 ASEAN DRFI Forum CCRIF Nov3

    Uploaded by

    Asean Drr Portal
    The document discusses regional catastrophe risk pooling vehicles and their potential application in ASEAN countries. It provides details on existing risk pooling facilities like the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and efforts underway in the Pacific through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). The CCRIF allows Caribbean governments to access quick payouts after disasters through a joint reserve mechanism based on parametric insurance. Key lessons from CCRIF include the need to identify country needs, design simple insurance instruments, and create political will and local ownership. The document raises whether similar regional risk pooling vehicle(s) could help ASEAN countries finance natural disasters.

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    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    ASEANDISASTERRISKFINANCING&INSURANCEFORUM
    Session2

    Regionalcatastropheriskpoolingvehicles: R i l t t h ik li hi l Actingcollectivelytofinancenaturaldisasters
    TheexampleoftheCaribbeanCatastropheRiskInsuranceFacility h l f h bb h k l
    OlivierMahul ProgramCoordinator,DisasterRiskFinancing&Insurance,TheWorldBank November8 10,2011 Jakarta,Indonesia

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    Catastropherisktransfercanbeveryexpensive
    14.00

    AllPerils
    12.00

    Peak:USWindandEarthquake NonPeak:EuroWindandJapanEarthquake Diversifying:Mexico,Japan,Taiwan,Mediterranean, LatinAmerica,AustraliaEarthquake;Japan,AustraliaWind MultiPeril:MultiplePerilsinSameTransaction

    Multiple(SpreadPre emium/ExpectedLoss)

    10.00 10 00

    8.00

    6.00

    4.00

    2.00

    0.00 0 00 0 50 100 150 200 250 300 350 400 450 500

    ExpectedLossinBasisPoints

    Source:DisasterRiskFinancingandInsuranceProgram(2011)

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    Insurancepricingandriskpooling concepts i i d ik li
    Technicalinsurancepremium ( (BEFOREriskpooling) p g)
    1. Lowerreinsurance costsduetobetter structuredand diversifiedportfolio Jointreservestoretain thefirstaggregateloss

    Technicalinsurancepremium (AFTERriskpooling)

    CostofCapital (reservesandcostof risktransfer)

    2.

    CostofCapital Cost of Capital (reservesandcostof risktransfer) OperatingCosts


    Economiesofscaleinoperating costs(e.g.,fixedcosts)

    OperatingCosts

    AnnualExpectedLoss

    Underlyingriskisunchanged

    AnnualExpectedLoss

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    Illustrations
    CaribbeanCatastropheRiskInsuranceFacility P ifi Di t Ri k I PacificDisasterRiskInsuranceProgram P OpportunitiesandchallengesinASEAN countries

    ASEANDISASTERRISKFINANCING RossStein USGS &INSURANCEFORUM

    VolkanSevilgen&

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:TheProblem
    Highexposuretoadversenaturalevents
    HurricaneGilbert(1988)inStLuciacausedlossesof 365%ofnationalGDP 365% of national GDP HurricaneIvan(2004)inGrenadacausedlossesof 203%ofGDP

    Li it d fi Limitedfinancialcapacitypostdisaster i l it t di t Limitedcapacitytoestablishnationalreserves Limited capacity to spread risk Limitedcapacitytospreadrisk


    geographicallyduetotheirsmallsize overtimeduetohighdebtlevels g

    Limitedaccesstoinsurance/reinsurancemarkets

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:TheSolution
    AjointreservemechanismthatallowsCaribbean j Governmentstoaccessliquidityatshortnoticeincase ofamajorhurricaneoranearthquake quick disbursing relying on parametric quickdisbursing relyingonparametric insuranceinstruments transparentrules standardparametric insurancepolicies i li i withoutcrosssubsidization contributionare basedoneachisland sspecificrisk based on each islands specific risk atthelowestpossiblecost retainingsome oftheriskwhileleveragingthecapacityof thefinancialmarkets the financial markets

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Parametricinsurance

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Catastropheriskpoolingvehicle

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Policyholderoverview
    Maximum per peril coverage Maximumperperilcoverage limitofUS$100M Minimummodeled attachment
    1/15yearHurricane 1/20yearEarthquake

    Limit and premium metrics Limitandpremiummetrics


    Averagemodeledattachment
    1/17yearHurricane 1/32yearEarthquake

    US$624M f t t l li it i US$624Moftotallimitissued d
    US$371MHurricane US$253MEarthquake

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Reinsurancestructure
    CCRIF Reinsurance Structure, 2011/12
    Return Period (yrs) 1,401 LAYER 3 TRAD $55M Amount ($ M) 150.0 LAYER 3 CAP MKT $30M

    25.2 LAYER 2 $35M 8.8 LAYER 1 $5M 7.1 CCRIF RETENTION $25M $ 1.5

    65.0

    30.0

    25.0

    0.0

    A Annualaggregateexcess l oflosscoverage Toplayercapacitysplit betweentraditionaland b di i l d capitalmarkets(catswap intermediatedbyWB Treasury) Leadreinsurer:SwissRe Followingmarkets: MunichRe;PartnerRe; HannoverRe;Catlin; Hiscox CATswapwithWB TreasuryandSwissRe

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Donorsplayedacriticalroleatinception
    InitialgrantfromGovernmentofJapanforthepreparation phase(20052007) EstablishmentofadedicatedMultiDonorTrustFund(2006) Establishment of a dedicated Multi Donor Trust Fund (2006) withdonorcontributionsofUS$67million

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    CCRIF:Governancestructure

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    Someimportantlessons
    Identifythespecificneedsofthecountries Id tif th ifi d f th ti Design anintegrateddisasterriskfinancingandinsurancestrategy g g gy Designsimpleinsuranceinstruments LinkwithDRMandCCAagenda CreatepositiveexternalitiesbeyondDRFI PoliticalEconomy
    Nocrosssubsidization Peerpressureamongcountries Localownership Valuepropositionforalltheparties(client/donor/industry) Value proposition for all the parties (client/donor/industry)

    Longtermeffortsthatpaysoff

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    PacificCatastropheRiskAssessmentandFinancingInitiative ifi h ik d i i ii i
    Opensource,webmappingtechnologytoshareriskassessmentresultsformore effectiveDisasterRiskManagementinthePacific

    BuildingandRoadExposureinFiji

    Buildingandroadexposure,PortVila,Vanuatu

    TsunamiHazardandEvacuationZonesinFiji

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    PCRAFI:Movingtowardsapplications

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    PacificDisasterRiskFinancingandInsurance
    IncreasingthefinancialresilienceofthePICsagainstnaturaldisasters

    Developinganintegrated disasterriskfinancing disaster risk financing strategy

    (i) Capacitybuildingonmacroeconomic planningofnaturaldisastersandintegrated planning of natural disasters and integrated disasterriskfinancingandinsurance; (ii) Developmentofprivatedisasterrisk insurancemarkets; (iii) PilotingofPacificdisasterriskinsurance programforgovernments.

    ASEANDISASTERRISKFINANCING &INSURANCEFORUM

    Regionalcatastropheriskpoolingvehicle(s)for ASEANCountries?

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