Tonga is to receive the first payout from an insurance pilot being tested by six Pacific island countries and a group of reinsurance companies
The Pacific Catastrophe Risk Insurance Pilot was launched in January 2013 to test a risk-transfer arrangement modelled on an insurance plan. It uses 'parametric triggers', such as cyclone intensity or earthquake magnitude to determine payouts, which allows for quick disbursements.
The World Bank acts as intermediary between the six participating Pacific Island nations - Tonga, Samoa, Vanuatu, Cook Islands, Marshall Islands and Solomon Islands - and the reinsurers Sompo Japan Insurance, Mitsui Sumimoto Insurance, Tokio Marine & Nichido Fire Insurance, and Swiss Re. AIR Worldwide provides the underlying risk modelling for the transaction.
Cyclone Ian hit Tonga's Ha'pai island group on January 11 and 12, displacing thousands of people from their homes and causing major devastation to crops and infrastructure, including health centres and schools.
The World Bank announced yesterday that Tonga's government would benefit from a $1.27m payment from the insurance pilot to help it address the damage caused by the cyclone.
'Funds received under the scheme will allow the government to meet some of those urgent needs as they look to repair and rebuild in the days and weeks ahead,' said Franz Drees-Gross, the World Bank's country director for the Pacific islands said.
Dr 'Aisake Valu Eke, Tonga's minister for finance and national planning, added: 'The funds received from the catastrophe risk insurance pilot makes an important financial contribution for carrying out the government strategy for mitigating natural disasters [and] to ensure that response efforts to help the people of Ha'pai recover and return to their normal everyday lives can continue without interruption or delay.'
The Japanese government currently co-finances the insurance premiums of Tonga, the Marshall Islands, Samoa, the Solomon Islands and Vanuatu. The Cook Islands fully fund their own insurance premiums.