The World Bank approved a $24 million loan transaction that enables Honduras and Nicaragua to enter into the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
This comes after the World Bank and CCRIF completed their first cat bond, which was a $30 million deal that provides hurricane and earthquake capacity for the CCRIF, who provides cover to the fund s member states, while acting for the CCRIF to offload some of its members risks.
Now the CCRIF is looking to diversify its portfolio and offer liquidity at affordable rates by including 2 Latin American countries.
The $24 million consists of a $12 million loan for Honduras and Nicaragua, that covers their entrance fee and 7 years of premiums for Honduras and 4 years for Nicaragua, which is being funded by the International Development Association (IDA). Under the terms of the loan, Honduras has 25-year maturity period and a 5-year grace period, while Nicaragua receives a 40-year maturity period and a 10-year grace period.
Nicaragua and Honduras are vulnerable to the losses associated with hurricanes, earthquakes, tropical storms, floods, landslides and heavy rainfall, with annual economic losses equaling 2.8% of GDP in Honduras, and 1.8% of GDP in Nicaragua. Large-scale disasters caused by natural phenomena endangers government efforts to reduce poverty and promote prosperity, while threatening to undo the development gains made to date.
The CCRIF has disbursed $32 million to help natural disaster related emergencies. Owing to the fund s number of member states, which has increased by 2, and capital contributed by donor countries. The CCRIF offers favorable insurance, providing members with 50% saving they take out insurance individually within the international markets.
The CCRIF is vital for its member states post-disaster and, it s believed that other Central American countries are beginning to look at accessing the fund.