Hurricanes: The iconic images of their power and furiousness are filled with bent-over palm trees, roofs being ripped from their structures, and powerful storm surges dislodging businesses and homes from their foundations or moorings. But in the mountainous countries of the Caribbean and Central America, rainfall, caused by anything from tropical waves to hurricanes, can have equally devastating and long-lasting impacts on the local governments and their citizens. Numerous examples are present in recent memory: an unnamed subtropical storm in 2004 caused extensive damage in Haiti, and in December 2013, a tropical wave moved through St. Vincent and the Grenadines and St. Lucia around Christmas, producing dangerous flash floods and landslides, resulting in significant destruction to infrastructure. Mitch (1998), perhaps, remains the most powerful reminder of the impact that heavy rainfall can have on these countries. The copious amounts of precipitation the storm produced in Honduras and Nicaragua led to USD 4.8 billion (USD 1998) in damage; USD 3.8 billion (1998 USD) occurred in Honduras, which was equivalent to 70% of the country's gross domestic product.
The impact of rainfall on these countries is why the CCRIF SPC (formerly the Caribbean Catastrophe Risk and Insurance Facility) added a parametric excess rainfall protection in 2014 to its suite of product offerings to its clients. During the 2016 renewal, thirteen countries purchased excess rainfall cover, in addition to tropical cyclone and earthquake protection. The governments purchase this excess rainfall coverage directly from the CCRIF SPC, who subsequently buys reinsurance coverage from Swiss Re Corporate Solutions. One country, Belize, has already seen the benefit of adding the excess rainfall option in their first year of purchasing coverage; after the passage of Hurricane Earl through the country, Belize received a $260,000 payout from its excess rainfall policy. While their insurance policy, and subsequent payout, may seem small, the rapid delivery of the funds assists the government in the immediate aftermath response efforts. The flexibility of parametric insurance allows the buyer of the policy, in this case the Government of Belize, to use the funds for whatever they deem most critical.
With the 2016 Atlantic hurricane season just approaching its climatological peak, and the activity levels already approaching the levels we've observed in recent years, a holistic and thorough strategy to address the economic and physical impacts of tropical cyclones is key for Caribbean and Central American countries. The excess rainfall cover purchased by many of the CCRIF countries this year will further increase their financial resilience to devastating, high-impact rain events.
Category: Climate/natural disasters: Disaster risk, Floods/storms, Resilience