The Pacific Catastrophe Risk Insurance Company (PCRIC) is a special-purpose disaster risk insurer created to provide a pathway for nations in the Pacific Islands region to secure financial solutions to the costly impact of natural disasters. PCRIC traces its origins to a pilot insurance program launched by the World Bank in 2013 under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). As this pilot program came to a close in 2015, there were calls from across the region for ongoing access to disaster risk financing options. Donors responded positively and in 2016, PCRIC was established in the Cook Islands.
PCRIC exists exclusively for the benefit of Pacific Island nations. It was created to close the gaps many island nations faced in securing readily accessible funds in the aftermath of a disaster, and to advance knowledge and understanding of methodologies and pathways for managing the financial impact of natural disasters. PCRIC operates as a provider of disaster risk financing (DRF) instruments and capacity building activities, specialising in parametric insurance. This form of insurance differs from traditional insurance where the client is covered against the loss incurred (like fire or flood damage to an asset) subject to assessment. In comparison, PCRIC’s parametric solutions consider the probability of a loss-causing event occurring (like a cyclone or earthquake) and provides prompt payouts based on the modelled impact that will have effect on communities, livelihoods, and physical infrastructure.
This means that instead of making a payout based on physical assessment of the impact post-event, payment against a PCRIC policy will occur if the event is calculated to have exceeded pre-defined thresholds for one or a selection of agreed parameters. This approach provides clients with a pre-arranged solution customised to their specific circumstances and tied to the scale of the impact, providing a greater degree of certainty even before an event occurs. Additionally, with no assessment necessary, payouts can generally be made within as little as 14 days of the event occurring.
PCRIC is one of four regional risk pools operating around the globe, which act to create market scale that can be leveraged on behalf of vulnerable developing nations. PCRIC facilitates the pooling of disaster risk across its small island state members and then presents this pool of risk as a single market opportunity to global insurers, transferring financial risk away from the region and securing far better pricing outcomes than are possible through individual nations acting alone. The more nations that join PCRIC, the larger the pool of risk and the greater the collective benefit.
Strongly supported by donors for nearly a decade now, the development of PCRIC has not always been an easy journey. In the early years, clients could only choose products addressing the risks associated with Tropical Cyclones or Earthquakes. As the market grappled with a very unfamiliar product concept, policy uptake was constrained, with only 3 or 4 nations buying policies on an annual basis.
Nevertheless, effectiveness of the product was validated by payouts totalling almost US$10M to Tonga in response to the impact of TCs Ian, Gita, and Harold, and US$1.9M to Vanuatu related to TC Pam. The advent of COVID severely constrained client engagement, and it took an unswerving commitment and several years of extreme effort to rebuild understanding and momentum in the market. Ultimately, this effort paid off with sovereign policies now current in Cook Islands, Fiji, Niue, Samoa, Tonga, and Vanuatu. In addition, non-sovereign policies exist with a state-owned enterprise (SOE) in Papua New Guinea and a nongovernment organisation (NGO) in Fiji. Overall, PCRIC’s 8 current policies cover 17 perils in 7 nations, with total coverage value of US$52.5M. This represents dramatic growth for the company over earlier years.
A major contributor to this outcome was the very positive response to work undertaken throughout 2024 to redesign our policy offering, enhancing transparency and ease of comprehension, with an emphasis on people and community impact rather than physical impact alone. Current products cover Tropical Cyclone, Earthquake, Tsunami and Excess Rainfall. A drought product will be launched in 2025, satisfying demand particularly from the region’s more northerly located nations.
With as many as 14 nations, excluding territories, able to join PCRIC, there is clearly more work to be done. In this regard, affordability is a key consideration that requires a global solution. Many of the nations impacted by natural disaster are not only physically vulnerable but are financially vulnerable as well. Budgets are often already stretched, and bearing the full weight of policy premiums to secure meaningful amounts of coverage is beyond reach in most instances. For sovereign policies written in 2024 PCRIC secured donor support in the form of premium financing, but this is by no means guaranteed to continue indefinitely. This is not only an issue evident in the Pacific, but globally. To avoid a surge of cap-inhand post-disaster aid dependency, the global family of wealthy nations must come to the table prepared to support sustainable and affordable solutions.
At the same time, PCRIC is exploring options which allow it to leverage its unique knowledge and standing across the Pacific in the CDRFI space. This includes expanding policy options for state owned utility service providers, and NGOs active in sectors such as tourism and agriculture, which are critically important economic drivers across the whole region. Equally, though we are among the youngest of regional organisations, we are actively exploring pathways for supporting nations of the region to gain access to global funds established to address the impact of climate change.
Elsewhere, we are aware that the knowledge and capacity to make well-informed decisions regarding DRF needs to be greatly expanded and elevated throughout the region. We see a clear need for investment in the next generation of leaders who can confidently navigate the complexities of ensuring the best possible levels of disaster risk protection for their nations. Our commitment in this regard is reflected in our collaboration with the Global Shield Solutions Platform (GSSP) and University of the South Pacific (USP) to establish vocational courses, with scholarships also mooted. Further, we co-host the key regional workshop on DRF on an annual basis to ensure access to expertise from amongst the world’s best in their field.
As a passionate advocate for the region, there is no end to the work that needs to be done to ensure each and every island nation has equitable access to effective disaster risk finance. There is no single ‘silver bullet’ product or initiative available to address the need, but well-defined, pre-arranged insurance-based solutions remove uncertainty, undergird pre-emptive planning, and help facilitate a priority focus on the critical tasks of recovery and rebuilding, knowing essential funding is available. We are greatly encouraged by the support we have enjoyed over many years and are driven to serve the region well into the future.
