CCRIF SPC has launched its newest parametric insurance product, which has been developed for the electric utility sector in the Caribbean. The development of this product is part of the scaling-up plans of CCRIF, which has as one area of focus the expansion of the Facility’s product offerings, an example of which is to address the needs of the electric utility sector in the Caribbean. By launching this product, CCRIF has expanded coverage to non-sovereigns and to the private sector, as it takes another bold step to grow and diversify its portfolio and membership. CCRIF currently provides parametric insurance coverage for tropical cyclones, earthquakes, excess rainfall, and the fisheries sector to 19 governments in the Caribbean and 3 in Central America.
The parametric insurance product for electric utilities has been first purchased by the Anguilla Electricity Company Limited (ANGLEC) – with the Facility working with other electric utilities in the Caribbean who are expected to join.
The electric utilities product aims to limit the financial impact of devastating tropical cyclones by quickly providing financial liquidity to electric utility companies when a policy is triggered. The product will be limited to covering direct damage to the transmission and distribution (T&D) components of the electric power system due to impacts of wind. One of the issues faced by most electric utilities in the Caribbean is the inability to purchase traditional indemnity insurance for overhead T&D systems because of the very limited availability and uneconomical pricing.
Developing a parametric insurance solution for the electric utilities sector is particularly important because of the natural catastrophe risks faced by many Caribbean territories. Transmission and distribution systems are particularly exposed to wind damage from tropical cyclones such as storms and hurricanes. The close relationship between wind speed and overhead T&D system damage created the opportunity for CCRIF to develop a new and innovative parametric insurance product which could be priced much more competitively in the marketplace than traditional indemnity insurance and would present lower basis risk to the insured utilities.
The development of the utilities product was undertaken in close collaboration with CARILEC, an association of electric utilities, suppliers, manufacturers and other stakeholder operations in the electricity industry in the Caribbean where 35 of its members are electric utilities.