MITCHELL

WASHINGTON (CMC):

Grenada's Prime Minister Dr. Keith Mitchell says the increased frequency and severity of natural disasters in the Caribbean made it imperative for the establishment of a Caribbean Catastrophe Risk Insurance Facility (CCRIF).

Addressing a breakfast meeting of the Board of Governors of the International Monetary Fund (IMF) and the World Bank, Mitchell said that the CCRIF, launched five months ago, "is yet another example of the type of innovation which small states, in partnership with the World Bank, can create".

Mitchell said while it is "abundantly clear that Grenada's reconstruction is far from complete," following the devastation caused by Hurricane Ivan in 2004, the island is nonetheless grateful "for the support received over the past three years but more support is needed from the international community in areas such as housing and agriculture.

"In September 2004, following the passage of Hurricane Ivan which left a trail of death and destruction in the Caribbean, CARICOM Heads of Government convened an emergency session. At that meeting, the Heads issued a clarion call to the international financial institutions to develop affordable and effective catastrophe risk instruments.

"We meet today, five months after the launch of the CCRIF - a remarkable achievement! We applaud the World Bank for its efforts to bring this innovative facility to fruition and for all the development partners which have contributed the US$47 million raised to capitalise the facility," he said.

The CCRIF, to which international development partners have contributed US$47 million to capitalise the facility, provides participating governments with immediate budget support when policies are triggered after an adverse event.

Flooding

The facility currently covers hurricanes and earthquake hazards and Mitchell said "we feel coverage should be extended to flooding, a point made by both Jamaica and Grenada at the donors pledging conference in February this year".

He said CCRIF policies are sold against government deficit loss which is a component of overall country-wide physical loss, estimated at almost 40 per cent, noting "in short, it is partial risk coverage."

But Mitchell told the meeting that the key advantages of this design were easy verification of claims, quick payout and flexible use of proceeds when the policies are triggered.

"As part of a pool, all participants enjoy the benefits of lower premiums. Savings on premium are estimated at 40 per cent. That said, premiums are still very high which compels the facility to enlarge its membership to further diversify risk and reduce premiums.

"We know the CCRIF is not intended to cover full reconstruction costs. Consider the case of Grenada which had losses estimated at US$900 million following Hurricane Ivan in 2004. Had the Facility been available, Grenada would have received a payout of US$40 million," which he said was less than five per cent of total losses.

But, despite that example, the Grenadian leader speaking on the theme 'A Regional Perspective on the Caribbean Catastrophe Risk Insurance Facility' said that the necessity for this facility "is clear and compelling for several reasons."