Why was CCRIF designed as a parametric facility?
There are four main reasons CCRIF was designed as a parametric facility:
- Payouts can be calculated and made very quickly because loss adjusters do not have to be relied on to estimate damage after a catastrophe event, which can take months or years;
- Governments do not have to provide detailed asset values and other information prior to the insurance programme commencing, and have just one form to sign during the entire claims process;
- Calculation of payouts is totally objective, based on a few simple input parameters published widely in the public domain from the globally-mandated body responsible for estimating those particular parameters, and a set of formulae which form part of the policy; and
- The risk, which drives policy pricing, is uniformly defined (i.e. there is no subjectivity in the definition of the risk).