Caribbean and Central American countries have formalized partnership for catastrophe risk insurance making Central American countries to be eligible to join a World Bank-backed insurance scheme.
The Council of Ministers of Finance of Central America, Panama and the Dominican Republic (COSEFIN) and CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) have signed a memorandum of understanding to allow Central American countries to join the sovereign catastrophe risk insurance pool.
Nicaragua is the first Central American country to sign up to the catastrophe risk insurance, World Bank mentioned in a press release issued on April 18, 2015. Other COSEFIN member states are expected to join Caribbean catastrophe risk insurance facility either later this year or in 2016.
"This insurance will allow us to strengthen financial resilience to natural disasters and continue our efforts to reduce poverty and respond to climate change challenges as part of our National Human Development Plan,” Ivan Acosta, Minister of Finance of Nicaragua said.
Under this catastrophe risk insurance program, countries receive financial support to meet costs in the aftermath of catastrophe. Since its inception, 12 payouts, totaling $35.6m, have been made to eight member governments, all within two weeks of each event.
According to the press report, nine countries in Central America and the Caribbean have experienced at least one disaster with an economic impact of more than 50 percent of their annual gross domestic product (GDP) since 1980.
"This a real example of a regional public good where collective action has clear financial benefits and can help countries tackle the adverse impacts of climate change,” said Jorge Familiar, World Bank Vice President for Latin America and the Caribbean.
The CCRIF, established in 2007, is the world’s first multi-country catastrophe risk pooling mechanism which offers sovereign insurance at affordable rates to its members against hurricanes, earthquakes and excess rainfall.