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The Pacific Catastrophe Risk Insurance Company (PCRIC) has expanded its parametric insurance risk pool in the last year, signing up new sovereign and its first non-sovereign policy holders, while continuing to develop its products and looking to expand as it seeks to reach scale to deliver on risk pool efficiencies for its clients.
The Pacific Catastrophe Risk Insurance Company (PCRIC) is a regional catastrophe insurance facility that provides its products in parametric form.
It launched to provide the governments of Pacific Islands with parametric climate and seismic cover, focused on cyclones and earthquake risks.
Since its launch the PCRIC risk pool has welcomed new members, with now five countries buying policies from it and a sixth being an observer.
Fiji, Tonga, Samoa, the Cook Islands and Niue all now purchase parametric disaster protection for one or more perils from PCRIC, while Papua New Guinea has become an observer after PCRIC sold its first parametric insurance cover to a non-sovereign, an innovative parametric solution that provides responsive disaster insurance to the operator of a submarine fibre optic cable network.
The number of policies sold in 2023 was double the previous year, as PCRIC outreach and education of nations in the Pacific region starts to deliver more active participation in the parametric risk pool facility.
Much like the CCRIF SPC in the Caribbean, PCRIC’s mandate is to expand and realise economies and efficiencies of scale and diversification within its risk pool, to make parametric disaster insurance accessible and more affordable.
Steady progress is being made and PCRIC has been increasing the amount of reinsurance it purchases to support risk pool growth as well.
PCRIC’s reinsurance program was backed by Hiscox, Liberty Specialty Markets, Mitsui Sumitomo and Generali. It remains relatively small at this time, but the aim is to grow the risk pool and the use of reinsurance in tandem.
Developing new parametric insurance products is also high on the agenda, PCRIC sold its first excess rainfall policy last year and is working on a drought solution, as well as launching replica coverage, so other organisations (such as NGOs) can benefit from the same coverage as the sovereign buyer.
In addition, PCRIC has been working on a technical redesign of its existing cyclone and earthquake parametric products, with a goal to simplify them and make the parametric coverage easier to understood, while remaining responsive to country/buyer needs.
The organisation stated, “PCRIC remains steadfast in its mission to provide fit-for-purpose disaster risk financing solutions to the Pacific region. The successes realised throughout 2023 ensure the Company is poised to continue its trajectory of growth, reinforcing its position as a leader in the DRF field in the Pacific Islands region.
“The PCRIC Board and Management team look forward to building on this momentum in 2024 and beyond, further expanding reach and impact.”
Donor support has become critical for PCRIC, as it strives to keep its parametric policies affordable for countries.
The move into non-sovereign risk transfer is seen as a critical step, to help PCRIC expand faster and generate greater efficiencies from the pooling of risk and aggregated approach to the reinsurance market.
Reinsurance costs have certainly been a factor that has challenged PCRIC and perhaps been a driver for the increased need for donor support last year.
PCRIC Chair, Sarah-Jane Wild, stated, “Looking ahead, I’ve never been more confident of the significance and relevance of PCRIC to its target market. Whilst we are challenged by scale, the efficient use of resources, and the fostering of collaboration with governmental agencies, non- governmental organisations, and international partners will remain the cornerstone elements of our growth and sustainability strategy. We will also continue to collaborate by pooling our resources, sharing knowledge, and being part of the coordinated implementation of DRF and resilience initiatives aimed at reducing the financial risks associated with the disaster profile of the Pacific Islands region.
“With the ongoing support of a dedicated in-house and advisory team, supported by generous and committed partners and donors, PCRIC will continue to passionately serve the needs of our region, by exploring innovative solutions and technologies, by extending our reach, and by never believing we have done all that we can to protect regional communities against the impact and cost of disasters.”
CEO of PCRIC, Aholotu Palu, also said, “It is important to stress the specific need for the business to secure long-term support for both operational costs and premium financing to enhance product accessibility to regional nations. Additionally, as our relatively small market scale imposes practical constraints on what is possible from within the region, PCRIC will continue to take every opportunity to strenuously advocate for an expanded capital base which will allow the business to accommodate higher levels for risk. In this context we will continue to innovate, collaborate, and adapt to the evolving challenges facing our region.”
Scaling a regional risk pool in an area where insurance has not been purchased by sovereigns prior to the existence of PCRIC has been a challenhge.
But the benefits are clear, as evidenced in a number of cyclone payouts it has made over the years.
It is to be hoped the expansion and diversification can continue, helped by the development of new products and sale of more non-sovereign and replica policies, which in time might help to realise greater cost efficiencies for the sovereign buyers as well.
PCRIC grows parametric risk pool, develops new products to expand further was published by: www.Artemis.bm
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