New insurance facility to boost natural disaster resilience in Pacific Island countries
The World Bank has announced the start of the fifth round of Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) Insurance, along with the recent establishment of a new Cook Islands-based insurance company, called the PCRAFI Facility, which will deliver this innovative and competitive insurance.
The Facility has issued its first insurance policies to the Cook Islands, Marshall Islands, Tonga, Samoa and Vanuatu, which will be complemented by reinsurance provided by Sompo Japan Nipponkoa Insurance, Mitsui Sumitomo Insurance, Tokio Marine & Nichido Fire Insurance, Swiss Re, and Munich Re via its subsidiary NewRe – securing Pacific Island countries total coverage of US$38.2 million against tropical cyclones, earthquakes and tsunamis. World Bank Treasury played an integral role in securing participating Pacific Island countries competitive rates from the international reinsurance market.
“We are pleased the PCRAFI Facility has been established to assist in providing Pacific Island countries with insurance coverage against tropical cyclones and earthquakes,” said Cook Islands Minister of Finance and Economic Management Hon. Mark Brown. “We look forward to the Facility growing and developing additional products to help us better meet our post-disaster financial needs in the Pacific region.”
The Facility will receive US$6 million in capital in its first year of operation from the PCRAFI Multi-Donor Trust Fund – with the World Bank as Trustee – with funding support from Germany, Japan, the United Kingdom, and the United States, and building on the more than US$40 million in grant funding the four donors have provided to Pacific Island countries under the G7 InsuResilience Initiative.
“The PCRAFI Facility forms part of Phase II of the PCRAFI program, which aims to increase the fiscal resilience of Pacific Island countries and their capacity to meet post-disaster funding needs without compromising domestic budgets,” said Michel Kerf, World Bank Country Director for Timor-Leste, Papua New Guinea and the Pacific Islands. “The Facility also affords Pacific Island countries greater ownership of disaster and climate risk financing – meaning more control and influence over the design of future disaster and climate risk solutions.”
In addition to the operation of the PCRAFI Facility, the PCRAFI Multi-Donor Trust Fund will support a program of technical assistance to strengthen the institutional capacity of the PCRAFI Facility, regional organizations, and the Ministries of Finance of beneficiary Pacific Island countries. Technical assistance will focus on the public financial management of natural disasters.
The PCRAFI Facility was officially established in the Cook Islands on June 10, 2016 as a foundation with a board of directors that owns a group captive insurer, and received its captive insurance license on September 22, 2016.
About PCRAFI Phase II
Phase II of the PCRAFI program aims to increase the fiscal resilience of Pacific Island countries and their capacity to meet post disaster funding needs without compromising domestic budgets. The second phase of the program focuses only on disaster risk finance and is comprised of two pillars, (i) the PCRAFI Facility, and (ii) the PCRAFI Technical Assistance Program. Phase II of PCRAFI is a joint initiative of the World Bank, Pacific Islands Forum Secretariat and the Pacific Community (SPC), with financial support from Germany, Japan, the United States and the United Kingdom. Phase II builds upon the initial PCRAFI program launched in 2007 with the aim to provide disaster risk management and finance solutions to help build the resilience of PICs. The complementary disaster risk management work is continued under the Pacific Resilience Program.
Launched in 2007, PCRAFI aimed with the aim to provide disaster risk management and finance solutions to help build the resilience of PICs. It was a joint initiative of the World Bank, the Pacific Community (SPC), and the Asian Development Bank (ADB), with financial support from the government of Japan, the Global Facility for Disaster Reduction and Recovery (GFDRR), and the European Union (EU).
About the Pacific Resilience Plan (PREP)
To address the challenges posed by disaster and climatic hazards in the Pacific, the PREP consolidates the national and regional programs such as PCRAFI that have been undertaken by the World Bank to date. The PREP is designed to (i) strengthen early warning and preparedness; (ii) create a framework for stronger and prioritized investments in resilience and retrofitting of key public assets to meet international standards; and (iii) improve countries’ post-disaster response capacity through strengthened financial resilience to disaster events. Under the PREP, premium financing for the PICs has been secured until October 2018.