GRAND CAYMAN, Cayman Islands — The Caribbean Catastrophe Risk Financing Facility (CCRIF) SPC recently launched its newest parametric insurance product, which has been developed for the electric utility sector in the Caribbean.
By launching this product, CCRIF has expanded coverage to non-sovereigns and to the private sector, as it takes another bold step to grow and diversify its portfolio and membership. CCRIF also provides parametric insurance coverage for tropical cyclones, earthquakes, excess rainfall, and the fisheries sector to 19 governments in the Caribbean and three in Central America.
The parametric insurance product for electric utilities has been first purchased by the Anguilla Electricity Company Limited (ANGLEC) – with the Facility working with other electric utilities in the Caribbean who are expected to join. CCRIF’s ability to develop and offer products to non-sovereigns is based on the fact that, as a segregated portfolio company (SPC), the Facility is able to establish segregated portfolios (SPs) or cells that allow for total segregation of risk and risk management operations (pricing, policy formats etc.) among cells.
Under this structure of SPs, CCRIF also is able to provide benefits such as the sharing of operational functions and costs, thereby being able to offer products that cost much less than if each member were to approach the reinsurance market individually. The SP established for public utilities is called the Caribbean Public Utilities SP (“CPU SP”) and joins four other SPs in the CCRIF structure.
The electric utilities product aims to limit the financial impact of devastating tropical cyclones by quickly providing financial liquidity to electric utility companies when a policy is triggered. The product will be limited to covering direct damage to the transmission and distribution (T&D) components of the electric power system due to impacts of wind. One of the issues faced by most electric utilities in the Caribbean is the inability to purchase traditional indemnity insurance for overhead T&D systems because of the very limited availability and uneconomical pricing.