Sabrina Gordon, Business Reporter

A worker from the National Water Commission attempts to free water pipes of rock debris during recovery efforts after Hurricane Dean, in Manchioneal, Portland, August 21. National damage was not sufficient to trigger a payout to Jamaica from the regional insurance fund. - Ricardo Makyn/Staff Photographer.

Caribbean Catastrophe Risk Insurance Facility (CCRIF) calculations show that the storm damage from Hurricane Dean falls below the deductible on the policy, says Dr. Simon Young.

Young, the chief executive officer for CCRIF, also reaffirmed Wednesday that none of the policyholding countries in the region would be entitled to payouts, including Jamaica.

"By our calculations the storm did not produce modelled losses above the deductible in any of the countries affected by 'Dean' - so no payout will be due," said Young.

Jamaica has paid US$4 million in insurance premiums to the fund, which affords it coverage of US$94.4 million. The majority of the coverage, US$50 million, relates to hurricanes.

Young said the size of Jamaica's deductible would have to be supplied by the policyholder, but up to yesterday spokeswoman Cheryl Smith said the Finance Ministry was still without power after the storm and facing challenges in collating information.

Later, Smith directed enquiries to insurance regulator Financial Services Commission, without explanation.

CCRIF was designed to provide liquidity to countries for events in which their economies suffer a severe shock and has trouble functioning.

The deductible in the policy contract is equivalent to the loss that a country expects to suffer for at least a one in 20-year event.

"By our measure 'Dean' in Jamaica was more like a one-in-ten year event, and that measure is consistent with other data," said Young.

The CCRIF does not anticipate that the calculations or results will change, but the verification procedure will take a further three weeks to fully play out.

A final assessment will not be released until about the third week of September, said Young.

"Although I do not anticipate that any of the input variables will change nor do I think that there are any errors in CCRIF's preliminary calculations, the payout amount is not finally 'certified' until 28 days after an event," he advised the Financial Gleaner.

Calculations are verified by an independent third before any payout is made.

The process of assessment and verification starts 14 days after an event, and a second and final calculation is made 28 days following the storm or earthquake.

Payouts to a country is based on the loss that the policyholder has endured from a particular event.

Claims payments by the CCRIF are dependent on specific parametric triggers for the facility, determined by a hazard intensity index.

CCRIF uses an estimate of the loss measured by the hazard index, based on predetermined models of how loss amounts vary with wind speed.

The input data is derived from the U.S National Hurricane Center, as the insured countries are without the equipment to measure wind speed.

Once the hazard index is calculated for a particular hazard event affecting a member country, the index value is compared to the 'attachment and exhaustion points'.

The Attachment point is equivalent to a deductible on a standard insurance policy, as policyholders must endure some level of loss before the policy can become operational.

If the loss, estimated by CCRIF, is below the policy's deductible or attachment point then no payment is made to that country for the event, and the policyholder will have to cover all losses.

This is what happened in the case of Jamaica, explained Dr. Young.

Once the loss as is above the deductible or the attachment point then the payout is on a sliding scale up to the policy limit, with the policy paying a fixed proportion of the expected losses up to that limit.

The exhaustion point refers to the limit of the payout, which essentially is the maximum value of the policy. As the hazard index increases above the attachment point/deductible, the corresponding payout increases up to the exhaustion point.

Payouts for events with hazard index that exceeds the exhaustion point will be paid at the policy limit.

Attachments and exhaustion points are decided by individual countries and are used to determine the amount of premium paid.

A total estimate for damage to the country by Hurricane Dean is not yet available, however local insurers forecast indicates that it will be less than that for Hurricane Ivan.

sabrina.gordon@gleanerjm.com