The World Bank has approved US$14.2 million of credit at zero-interest credit from the International Development Agency (IDA) to four country members of the Organisation of Eastern Caribbean States to support their participation in the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
The bank also approved an IDA grant of US$9 million to Haiti.
The insurance fund is being established as cushion for regional countries whose susceptibility to hurricanes have derailed economic targets in the past and resulted in billions of dollars in recovery costs.
In 2004, for example, Hurricane Ivan hit eight Caribbean countries, including Grenada, whose losses were estimated at US$800 million, about two times the size of the island's economy.
World Bank data indicates that hurricanes have caused more than US$16 billion in losses in Caribbean nations since 1979.
Caribbean states are hit, on average, by one major hurricane every two years and have only limited options available to respond. "With small economies and high debt levels, they often depend on donors to finance post-disaster needs, but donor resources often take time to materialise," the bank said.
"CCRIF will enable governments to purchase catastrophe coverage akin to business interruption insurance that will provide them with an early cash payment after a major hurricane or earthquake."
The insurance fund - which is expected to save the region as much as 40 per cent on insurance premiums - is a first of its kind, according to Caroline Anstey, World Bank Country Director for the Caribbean.
Annual premiums are expected to vary from US$200,000 to US$4 million for coverage ranging from US$10 million to US$50 million.
The World Bank/IDA funds approved for Haiti, Dominica, Grenada, St. Lucia, and St. Vincent & the Grenadines will finance their contribution to the fund over three years.
"The funds will be disbursed in four instalments to the CCRIF at the request of each country's Ministry of Finance," said the funding agency in a statement.
The credit followed the February 26 donor pledging conference where Bermuda, Canada, France the United Kingdom, the Caribbean Development Bank and the World Bank agreed to put up US$47 million for the CCRIF's reserve fund.
To participate in the insurance plan, countries will be required to pay a one-off non-refundable entry fee and an annual premium, which will vary according to a country's individual risk profile.
Coverage will be limited to major hurricanes and earthquakes.
The facility is expected to become operational ahead of the 2007 hurricane season which begins June 1.
CCRIF participating countries
Anguilla, The Bahamas, Barbados, Belize, Bermuda, The British Virgin Islands, Cayman Islands, Dominica, Grenada, Haiti, Jamaica, Montserrat, St. Lucia, Trinidad and Tobago, St Kitts and Nevis, St. Lucia, and St. Vincent & the Grenadines.
