Tonga To Receive Record Insurance Payout Following Cyclone Harold

COOK ISLANDS, April 29, 2020– Following Cyclone Harold, the Pacific Catastrophe Risk Insurance Company (PCRIC) has announced a historic US$4.5 million payout to the government of Tonga. This payout, the largest in PCRIC’s history, will provide vital rapid-response financing for disaster relief efforts at a critical time when governments worldwide are also managing the impacts of COVID-19.

Tonga is among the Pacific Island countries that have secured catastrophe risk insurance from PCRIC, a regional platform offering insurance coverage against climate and seismic hazards, including tropical cyclones and earthquakes/tsunamis. PCRIC policies are designed for quick payouts following triggering events, ensuring immediate liquidity for disaster response.

Balwyn Fa’otusia, CEO of the Tonga Ministry of Finance, welcomed the confirmation of the payment: “These funds will enhance our ability to respond to the needs of our communities impacted by Cyclone Harold, while already dealing with the global pandemic. In these challenging times, the value of these products has proven crucial in supporting our broader strategy for financing natural disaster responses.”

Cyclone Harold reached Category 5 intensity as it swept through the Solomon Islands, Vanuatu, Fiji, and Tonga, causing extensive damage across the region. The cyclone came within 100km of Tongatapu, Tonga’s main island, bringing significant storm surges that coincided with king tides, leading to widespread coastal damage.

PCRIC Interim Chairman Sarah-Jane Wild expressed solidarity with affected communities: “Our thoughts and prayers go out to the communities across the Pacific. Despite the dual challenges posed by COVID-19 and Cyclone Harold, we are proud to assist the Tongan government with much-needed financing that will help meet the needs of their communities.”

This incident has underscored the importance of a comprehensive and diversified disaster risk financing approach in the region. PCRIC plays a key role in enabling governments to access liquidity swiftly for rehabilitation and recovery efforts. The ongoing support from PCRIC’s donor partners and reinsurance panel has a positive impact across the Pacific Island region.

“We acknowledge the contributions from Germany, Japan, the United Kingdom, the United States, and Canada, as well as our reinsurance partners AXA XL, Descartes Underwriting (Generali Security), Liberty Mutual Reinsurance, and Mitsui Sumitomo Insurance, who provide coverage for the region,” Wild noted.

PCRIC is dedicated to developing new products that enhance financial protection for governments against various natural hazards, including droughts and excess rainfall.

“We value our close working relationship with the World Bank, which administers the PCRAFI multi-donor trust fund. This partnership has been instrumental in supporting PCRIC’s establishment, and we look forward to strengthening our relationships with key international organizations and Pacific Island governments to refine our products and services,” Wild added.

Contact:
David Traill
Project Coordinator
Pacific Catastrophe Risk Insurance Company (PCRIC)
David.Traill@PacificCatastropheRisk.org

History of PCRIC

Established in June 2016, PCRIC was born from regional efforts to address climate and disaster risks across 14 Pacific Island Countries (PICs). The concept of catastrophe risk insurance began as a pilot program from 2013 to 2015 through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), paving the way for a regional risk pool to provide affordable parametric insurance. PCRIC is a captive insurance company owned by the Pacific Catastrophe Risk Insurance Foundation (PCRIF), directed by participating Pacific Island Countries. Initial funding was provided by the PCRAFI Program Multi-Donor Trust Fund (MDTF) with contributions from Germany, Japan, the United States, and the United Kingdom as part of the G7 InsuResilience initiative on climate risk insurance.

Key Facts about PCRIC

• Regional Entity: Owned by PICs to meet the demand for catastrophe insurance that helps manage fiscal impacts from climate and geophysical hazards. Member countries form the Council of Members of the PCRIF and can access a range of available products.
• Sovereign Parametric Insurance: Policies offered for tropical cyclone and earthquake/tsunami events, providing rapid-response emergency funds based on pre-selected triggers.
• Insurance Policies: Five policies were issued in Season 8 to three participating countries, covering the period from November 1, 2019, to October 31, 2020.
• Reinsurance Protection: The company’s portfolio is validated by international reinsurance markets, with support from four reinsurers for Season 8: AXA XL, Descartes Underwriting (Generali Security), Liberty Mutual Reinsurance, and Mitsui Sumitomo Insurance.
• Additional Products: PCRIC creates a platform for PICs to explore coverage against additional risks such as drought and excess rainfall.
• Global Representation: Represents the Pacific region in global dialogues on climate and disaster risk insurance alongside similar regional facilities like the African Risk Capacity (ARC) and the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
• International Support: Received substantial backing from international donors, contributing US$24 million in capital to support existing insurance products.
• Strength in Regionalization: PCRIC exemplifies the achievements possible when PICs collaborate effectively.