The government recently signed back up for parametric insurance coverage from the former Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) for the upcoming hurricane season, according to the country’s deputy leader, but said it would be on a restructured basis with the country divided into three regional zones.
“This new arrangement will split the Bahamas into three zones, each with separate parametric triggers, featuring different attachment points and payout factors, to enhance the coverage that the country receives,” the Deputy Prime Minister and Minister of Finance Peter Turnquest told insurance website Artemis.
The Minister also stated that “the use of three different parametric triggers, for North, South and Central regions of The Bahamas, means that payouts can be tailored to provide insurance coverage that is designed based on the amount of infrastructure exposure in each of the parametric zones.”
According to the finance minister, splitting the Bahamas into these three zones, the government is hoping that coverage can be more closely aligned with its potential losses from tropical storms and hurricanes.
The zone separation is expected make the insurance coverage more targeted to the regions where disaster response is likely to be most important, due to factors such as population and exposure profile.
The CCRIF provides a mechanism by which the Caribbean and Central American nations, such as The Bahamas, can access efficient risk financing, thanks to the risk pooling mechanism and access to global reinsurance markets, as well as rapid payouts thanks to the parametric trigger design.