Climate Sense

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isk

overnance

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anagement

climate change adaptation strategy. The development

of the Caribbean Catastrophe Risk Insurance Facility

(CCRIF) is an example of a macro scale initiative that

can be regarded as a proactive and collective approach by

regional governments to adapt to and mitigate the risks

associated with their exposure to catastrophe hazards.

The CCRIF is the first risk insurance pool involving

multiple countries. It is an example of an innovative risk

transfer option in which a risk financing vehicle has been

specifically designed to provide Caribbean governments

with an efficient and cost effective method of pooling

natural hazard risk exposures into a single and better-

diversified portfolio. The pooling of these risks facilitates

effective access to the global reinsurance and capital

markets. The CCRIF currently issues parametric insur-

ance policies, which use modelled hazard parameters as a

basis for loss estimation and payment. Current hurricane

policies are based on modelled wind speed at representa-

tive ‘measuring points’, the results of which are then used

as a proxy for government losses via an index developed

by modelling company EQECAT. Parametric policies

enable very rapid payouts, providing governments with

liquidity to help with immediate post-disaster recovery

as well as medium-term rebuilding efforts.

The progress achieved in understanding the science

behind meteorological events, coupled with technologi-

cal advances within the risk management and financial

sector has facilitated the emergence of tools and mecha-

nisms such as the CCRIF, as well as the development

of supporting informational databases which allow

Caribbean governments to better manage their climate

related risks. CCRIF’s recent development of its own

catastrophe modelling platform – with the help of

Kinetic Analysis Corporation (KAC) – is a further

refinement of the capacity of the facility, and broadens

the scope of potential financial instruments which could

be made available for risk management and mitigation in

both the public and private sectors. This new platform

enables the use of either a hazard index or modelled-loss

as the basis for parametric contracts. Its modular and

highly scalable architecture enables new hazard modules

and a variety of exposure database formats (including

gridded and point-data exposure) to be simply added.

In addition to the multi-hazard hurricane model

(which includes surge and wave action loss generators),

CCRIF and KAC, in partnership with the Caribbean

Institute for Meteorology and Hydrology (CIMH),

are developing a rainfall index aimed at represent-

ing flood impacts. The model will produce six-hourly

rainfall estimates for the Caribbean Basin based on the

Global Forecast System initialization data, run with

topographic enhancement. This base rainfall accumu-

lation will be aggregated at the basin level and weighted

according to relative exposure within a basin to produce

an extreme rainfall impact index.

The rainfall product is of particular interest in the

agriculture sector, where index insurance is seen as a

potential solution to achieving cost-effective insurance

programmes for the region’s agricultural industry. The

occurring within the Caribbean. Similarly, predictions summarized in

a position paper by the Caribbean Development Bank released in 2008

indicate that by the end of the century temperatures within the region

will have risen between +1.4°C to +3.2°Cwith a greater than 66 per cent

probability of an increase in hurricane intensity.

While these forecasts and predictions are useful, it is also impor-

tant to recognize that the impact of climate change cannot be simply

conceptualized or limited to a future possibility. Its effects are

already being directly felt within the Caribbean region. The rise in

sea level and the increase in sea surface temperature already provide

evidence of the increasing dangers being inflicted on these fragile

environments and their economic and social landscape. The occur-

rence of sea-level rise and the warming of oceans has a direct effect

on wave and storm surge hazards independent of event frequency/

severity changes. These are especially pronounced in the Caribbean

where most of the population reside in close proximity to the coast.

Additionally, degradation of coral reefs as a result of coral bleach-

ing due to higher sea temperatures has led to a reduction in the

natural mitigation provided by reefs to coastal environments, and in

turn the surrounding coastal communities. The destructive impact

of climate change on the coral reefs across the region has also

resulted in irrevocable damage to the economic base of communi-

ties who rely heavily on the marine environment. The challenges

created by climate change are therefore much more complex than

just alterations to the physical environment within these islands.

The challenges are intrinsically tied to physical, social and economic

vulnerabilities – placing a disproportionate burden on small island

developing states.

There can be no dispute that the challenges created by climate

change through its present manifestation and potential future

impacts are daunting. However, the Caribbean is leading the world

in the development of innovative risk transfer solutions for catas-

trophe exposure, as part of an integrated risk management and

The aftermath of a localised rainfall event which triggered multiple landslides in

Dominica in November 2004