Junior Dowie/Staff Photographer
Rushing waters from the Hope River in lower Tavern, St Andrew, take this house and a church downriver as rains from Hurricane Ivan pummelled the island on September 11, 2004.

Gareth Manning, Sunday Gleaner Writer

Moving to address an apparent gap in its claims policy, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) has approached the World Bank for assistance to provide flood insurance for its beneficiaries.

The new provision is expected to come on stream by 2009, depending on the outcome of a study entitled, 'Global Fund for Disaster Risk Reduction'.

The study has already started and is expected to be completed in three to four months, following which, the results will be revised to determine the feasibility of implementation. Funding from the World Bank is expected to come in the form of a grant for which the sum has not yet been determined.

But the move by the CCRIF follows questions raised by local disaster management and weather officials that the insurance fund did not indemnify beneficiary countries against flood damage.

Disaster officials were particularly concerned that a claim could only be triggered based on damage sustained from wind intensities, which would mean that a beneficiary was not eligible to claim if the intensity of the damage was sustained from flood rains associated with the tropical cyclone, such as the case with Jamaica and Hurricane Ivan in 2004.

The People's National Party (PNP) administration last year paid US$4 million (J$280 million) for coverage on damage up to US$94.4 million (J$6.5 billion) from major hurricanes and earthquakes. The coverage was split between US$50 million ($3.4 billion) for hurricane damage and US$44.4 million ($3 billion) for damage from earthquakes.

Not eligible

However, following Hurricane Ivan, it was revealed that Jamaica was not eligible to draw down from the disaster fund because, based on the parameters under which claims can be made, the CCRIF said the intensity of the winds was not strong enough. The country suffered approximately $22 billion in total damage.

The CCRIF is based on a parametric model that provides indemnity for the 16 participating Caribbean countries against hurricane and earthquake damage. Participating countries receive benefits based on the intensity of the disasters, which in the case of a hurricane, is measured by wind speed.

The facility operates like a trust fund rather than an actual insurance policy, to facilitate speedy settlement of risks.

The CCRIF, in explaining the reason for the omission initially, said: "The problem with using rain and flooding for a parametric facility like this is that you don't have loss adjusters coming around and collecting data. It's all about getting money out quickly. So we are trying to find a way to incorporate that (flood indemnity), but we have to make sure that the results that we get are accurate," says Marsha Smith, CCRIF communications officer.

According to Smith, measuring damage by wind speed is currently the most reliable and available data that the facility can use to prove liquidity under a parametric-type system, to which all the respective government heads had agreed.

She says, however, that the facility would be exploring ways to access quick and accurate flood-damage data.

She says, too that a reduction on premiums this year, as well as, on the deductibles on policy, was under consideration and the price is expected to go down by 10 per cent. The clause limiting the number of times claims can be made will be reduced from once every 20 years to once every 15 years.

The reduction on premiums means the Government might pay US$3.6 million ($252 million) for the same coverage this year.

gareth.manning@gleanerjm.com