SHARM EL Sheikh, The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) Monday said it had signed a memorandum of understanding (MOU) with the African Risk Capacity Limited (ARC Ltd.) and the Pacific Catastrophe Risk Insurance Company (PCRIC) as part of a strategy aimed at strengthening the reach and impact of the world’s risk pools.
In 2007, the Caribbean Catastrophe Risk Insurance Facility was formed as the first multi-country risk pool in the world and was the first insurance instrument to successfully develop parametric policies backed by both traditional and capital markets.
In a statement, the CCRIF said the MOU built a framework for collaboration in the areas of advocacy, product development, and capacity building and was signed on the sidelines of the United Nations Climate Change Conference (COP 27) that ended here last weekend.
“The relevance and importance of the three global risk pools are clear, especially in the face of the increasing frequency and intensity of climate change-induced events. The MOU formalizes and establishes a framework for enhanced cooperation and partnership among the three risk pools,” the CCRIF said in a statement.
CCRIF chief executive officer, Isaac Anthony, said, “this is an opportunity to take risk pools to the next level so that these are not just seen as insurance or mechanisms for transferring risk, but also are viewed as tools to scale up disaster risk finance in a very significant way to enable governments to provide higher levels of financial protection for their populations, including the most vulnerable.”
Anthony said the MOU paves the way for the three risk pools to collaborate on sharing best practices in parametric insurance models, developing new and innovative DRF instruments, and undertaking joint initiatives focused on advocacy, capacity building, and training.
“One of the exciting things CCRIF is looking forward to is facilitating access to other types of DRF instruments. It will be important, for example, for the various risk pools to work collaboratively in engaging Global Shield, for example, to ensure that the role of risk pools is recognized in that particular effort,” Anthony added.
ARCH Ltd chief executive officer, Lesley Ndlovu, said the launch of Global Shield against Climate Risks at COP27 had been long awaited, adding this is one of the tangible achievements of the Egypt event, which will “transform the DRF landscape.”
“The Global Shield is an essential element in helping risk pools scale up their efforts to make insurance more accessible, affordable, and available to the people who need it the most in the face of increasing frequency and severity of natural disasters,” Ndlovu said.
“The signing of this MOU among the global risk pools sets the tone for a higher level of collaboration and a strong foundation on which to strengthen each other and our efforts and initiatives going forward.”
The MOU includes the development and sharing of best practices in parametric model development and management, as well as data management relating to parametric insurance instruments. Advocacy and capacity building will form a key component of joint activities to help raise understanding of the role of risk pools as development insurance facilities supporting economic and social development objectives of risk pools’ member countries.
CCRIF said that as loss and damage continue to rise and developing countries struggle to fund insurance premiums, member countries recognize that insurance provided by these risk pools is a critical financial resilience mechanism that protects them against the impact of perils and helps them meet the rising cost of disasters fuelled by climate change, which is largely not caused by their own actions.
But PCRIC chief executive officer, Aholotu Palu, explains, however, where there are barriers to scaling up DRF.
“While risk pools play an important role in moving the management of disaster and climate shocks away from ad hoc humanitarian assistance and focus the DRM ecosystem on an ex-ante approach, there is still somewhat a lack of understanding of the role we play in helping countries protect their financial means to build resilience and shield themselves from loss and damage caused by climate change.
“Through the signing of this MOU, we elevate collectively the role we play in helping countries fight the impact of climate change,” he added.
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