Settling in well at the Sharm El Sheikh International Convention Centre, Egypt, the CEO of the Pacific Catastrophe Risk Insurance Company (PCRIC), Mr. Aholotu Palu’s first official engagement at COP27 was the attendance of a panel discussion guided by the theme, ‘Disaster risk finance for extreme weather in Small Island Developing States: linking anticipatory action, rapid response and debt restructuring.’
The panellists discussed innovative solutions in disaster risk finance where small island developing states are leading the way, while simultaneously helping to establish deeper collaboration between governments, international humanitarian organizations and risk financing entities.
Over the years, there have been multiple discussions on forecast-based financing and anticipatory financing focusing on early triggers as opposed to late triggers for damage payouts. This means that the availability of funds must be readily accessible before a projected or predicted event, instead of waiting until the disaster has occurred.
Drawing on his recent trip to Tonga, Mr. Palu gave the example of how the dialogue with stakeholders there regarding a parametric drought insurance product under consideration also called for the introduction of early payout triggers. “As a result of consultations in Tonga supported by the global risk advisory group, Willis Towers Watson (WTW), our technical team are currently working to include an early trigger for our drought product and to validate the data that has been used for the model.”
“Early triggers are aligned to anticipatory action which is needed for quick financing support mainly directed towards risk prevention and preparedness when a disaster strikes to avoid loss and damage. We endeavour to design our products to support Pacific countries in being proactive against disaster risks and avoid further adding to the enormous burden imposed in the advent of a national crisis,” he explained.
Putting the spotlight on PCRIC’s highly anticipated excess rainfall and drought products, Mr. Palu shared that this action stemmed from a request from Pacific leaders in 2019. Now, the two new products are well into its advanced stages and slated to be released in early 2023.
He continued that, “PCRIC was established to offer scalable solutions premised to avoid risk(s) morphing into a crisis. There is a lack of understanding of risk pool products, therefore the company is actively advocating for the changing of mindsets towards disasters.”
PCRIC’s scalable solutions are categorised into three areas:
Scaling Up – Enhancing existing policies and programs to improve governance and operational systems to accommodate the disaster risk finance (DRF) needs.
Scaling Out – Reaching out to all relevant stakeholders in the public and private sectors, communities and civil societies in order to create impactful development for resilience.
Scaling Deep – Changing mindsets to seek a more proactive approach to understand local needs and values.