Tonga adopts Catastrophic Risk Insurance Program [1]
Tuesday, January 22, 2013 - 14:50. Updated on Monday, September 9, 2013 - 18:40.
Tonga is among five Pacific nations to adopt a Pilot Catastrophe Risk Insurance Program that was launched in Sydney, Australia on 18 January.
The pilot will test whether a “parameter” determined insurance plan involving insurance companies could help Pacific Island nations respond quickly with immediate funding if a natural disaster were to occur.
The Pacific Catastrophe Risk Insurance Pilot was set up by the five Pacific nations in conjunction with Japan, the World Bank and the Secretariat of the Pacific Community SPC.
World Bank Contact, Laura Keenan said the insurance policy would be based upon the parameters of a natural disaster such as the wind speed of a tropical cyclone or the ground motion of an earthquake. The parameters would be determined by an independent third party reporting agency and a “catastrophe risk model” developed by a leading catastrophe risk modelling firm AIR Worldwide.
Laura Keenan said that pay outs would be quicker as former methods of surveying determined losses could take up to several months even years. “Under this program, pay outs can be made quickly, usually within 2 to 3 weeks after a disaster.”
Reinsurance companies would underwrite the portfolio of catastrophe risk insurance policies placed by the World Bank. Pacific nations would access earthquake and tropical cyclone catastrophe coverage from insurance companies at an attractive price.
Minister for Finance and National Planning, Lisiate ‘Akolo said “This project will allow us to better respond immediately to phenomena like tropical cyclones, earthquakes and tsunamis.”
Director of the SPC Applied Geosciences and Technology Division, Dr. Russel Howorth said “This is an excellent opportunity to see whether insurance might work for Pacific island countries and to explore options for financing disaster responses in the future”.
The four insurance companies that joined pilot are: Sompo Japan Insurance, Mitsui Sumitomo Insurance, Tokio Marine & Nichido Fire Insurance and Swiss Re.
The Five Pacific nations involved are Tonga, Samoa, Vanuatu, Solomon Islands and the Marshall Islands.