The recent devastating tropical cyclone that went through the Pacific Islands of Vanuatu has caught the attention of the public. I followed the event with a special interest as someone who has worked on the recent renewal of the Pacific Catastrophe Risk Insurance Pilot for Swiss Re.
Fortunately, the Pacific Island nations are not without any defense to such devastation. Back in 2012, the Pacific Catastrophe Risk Insurance Pilot was introduced to the Pacific Island Nations to better protect them against disaster risks such as earthquake, tropical cyclone and tsunami utilizing parametric triggers by the World Bank. This has proven to be a highly useful disaster risk financing tool for the various island nations' governments.
In 2014, shortly after Tropical Cyclone Ian (a Cat 4 cyclone on a SS scale) made its landfall on Tonga (one of the participating Pacific Island Nations in the program together with Vanuatu, Cook Island, Marshall Island and Samoa) a quick cash payout of 1.27mn USD was made to the Government of Tonga in less than three weeks, which allowed them to purchase additional fuel for relief operations.
On March 13 of this year, another tragedy occurred - one of the worst disasters ever to hit the region, a Category 5 Tropical Cyclone (Pam) wiped through the island nation of Vanuatu and the surrounding areas and left behind a devastating trail in Port Villa, the capital and largest city of Vanuatu. So far this "monster" disaster has left more than 130,000 people displaced and nearly 90% of the buildings in Vanuatu affected (source: UNICEF).
As the people of Vanuatu struggle to get back on their feet, the Pacific Catastrophe Insurance Pilot program has already made a cash payout of 1.92mn USD to the Government of Vanuatu, only 10 days after the event. Last week the World Bank announced that the Government of Vanuatu has confirmed the receipt of the insurance payouts.
Given the program is currently a pilot, the limit of coverage is modest per country and per peril. The 1.92mn payout hence is only a fraction of the total economic loss suffered. However, the payout which happened in a swift manner would enable the Vanuatu Government to quickly mobilize the funds for emergency relief purposes, similar to what the Tonga Government had done in 2014.
The increasing intensity of climate threats and its contribution to the disaster risks in these Pacific Nations highlights the importance and the need for financial solutions to better manage these risks - and the Pacific Catastrophe Risk Insurance Pilot has once again demonstrated its usefulness in coping with disaster risk finances for these nations. In the meantime, we also hope that with the help of the international community the current program will be scaled up to provide for more meaningful protection to the Pacific Island Nations. The question is, how soon can this happen?
Category: Climate/natural disasters: Climate change, Disaster risk, Floods/storms