What factors determine if there is a payout or not?
The CCRIF payout calculation proceeds in a very similar way to a traditional insurance payout. The only difference is the way in which the loss is estimated. For CCRIF, the loss is calculated through an index or model in which hazard levels (wind, storm surge and waves for hurricane, ground shaking for earthquake) are used as a proxy for losses. In a traditional loss estimation, a loss adjuster will visit each claim and decide what the cost of repair is relative to the original replacement value of the building. Thereafter, payment is dependent on the total amount of coverage a government buys and the deductible selected.
It is important to note that the object of the Facility is not to cover the entire losse faced by affected states, but to provide, in case of a major adverse event, short-term liquidity to covered governments to fund both disaster response and basic government functions.