Creating a More Resilient Fisheries Sector in the Caribbean. The Case of COAST
In July 2019, CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) and the World Bank issued the Caribbean Oceans and Aquaculture Sustainability FaciliTy (COAST) fisheries parametric insurance policy to two Caribbean countries – Grenada and Saint Lucia. The COAST insurance policies provide coverage for fisherfolk and other players in the fisheries industry to enable them to recover quickly after weather-related events. COAST, which is designed to be a sustainable financing mechanism for Caribbean fisheries, was envisioned as a parametric insurance product at a scale relevant to vulnerable fishing communities. Taking advantage of CCRIF’s experience with parametric models and parametric insurance policies for tropical cyclone and excess rainfall, the COAST insurance product supports governments’ efforts to rapidly put money into the hands of those in the fisheries sector impacted by extreme weather, providing them with immediate economic relief and promoting a culture of building back better to enhance coastal community resilience after an extreme weather event.
The Fisheries Sector in the Caribbean
The fisheries sector in the CARICOM Region is an important source of livelihoods and contributes significantly to food security, poverty alleviation, employment, foreign exchange earnings, development and stability of rural and coastal communities, culture, recreation and tourism. The sector also is an important contributor to Gross Domestic Product (GDP) of many countries as well as an important foreign exchange earner and accounts for up to 7 per cent of some countries’ GDP. Additionally, the sector’s potential in terms of value-added processing and linkages with other sectors such as tourism, remains substantial.
The fisheries sector employs over 300,000 persons in the Caribbean both directly and indirectly. Indirect employs to the sector include persons engaged in processing, preserving, storing, transporting, marketing and distribution or selling fish or fish products, as well as other ancillary activities, such as net and gear making, ice production and supply, vessel construction and maintenance as well as persons involved in research, development and administration linked with the fisheries sector. Many of the fisherfolk in the region reside in rural communities where activities such as fishing and farming are the mainstay of the local economies. The fisheries sector also plays an important role in food security and disaster recovery. While the fisheries sector is highly vulnerable to climate hazards, after an event such as a storm, as soon as fisherfolk have the right weather conditions and functioning boats, they go out fishing and bring back fish to communities that would otherwise be isolated after a disaster. Therefore, the rapid recovery of the fisheries sector after a disaster is critical for the food security of communities in the Caribbean.
The COAST Insurance Product for Fisheries
The COAST insurance product is another in a list of innovative parametric insurance products that are provided by CCRIF to Caribbean and Central American governments. Since its inception in 2007, CCRIF has been providing insurance for tropical cyclones and earthquakes, and in 2013, based on demand from its members, the Facility provided coverage against excess rainfall events. Recent hurricanes in the Caribbean and their devastating effects demonstrate the need for a climate risk insurance product to help governments and fishing communities take steps before a storm event to reduce the potential damage and recover from the damage that inevitably occurs from such events, returning to fishing activities with minimal disturbance.
While it is governments that purchase COAST policies, this parametric insurance product is unique and is akin to a microinsurance product as the final beneficiaries are the fisherfolk and other persons in the sector such as boat captains, fish vendors etc. The policy includes a mechanism to ensure that payouts to the government are disbursed to these fisherfolk. The COAST policy incorporates an adverse weather component which provides coverage for interruption of fishing activities due to heavy rain and high waves and a tropical cyclone component which provides coverage for direct damages caused by tropical cyclones (wind and storm surge) to fishing vessels, fishing equipment and fisheries infrastructure.
Like CCRIF’s other insurance products, the COAST insurance policy also is parametric, whereby payouts are made based on a pre-defined level of wave height, rainfall, wind or storm surge and their impact. Therefore, payouts can be made quickly – within 14 days of the event to honour one of CCRIF’s core principles. If a country’s policy is triggered, the funds will be provided by CCRIF to the Ministry of Finance, followed by a rapid transfer to the fisherfolk and other affected parties throughout the country’s fishing industry. To facilitate timely transfer of funds, the list of beneficiaries is defined at the time of policy inception by the government and includes beneficiaries from throughout the fisheries industry value chain, including fishers, crew members, captains, boat owners, fish vendors and processors, etc.
Through identification of the beneficiaries and predefined procedures for payout transfers, COAST will allow for tracking the flow of funds down to the level of the beneficiaries, with a financial management and auditing system in place. These detailed data will support beneficiary analyses in the region. For example, CCRIF recently estimated that over 2.5 million persons in the region have benefitted from its 39 payouts totalling about US$150.3 million to 13 of its 21 member countries since 2007.
The COAST insurance product for the ﬁsheries sector is an innovative climate risk insurance mechanism and will be an essential tool to help address the impacts of natural hazards on food security and livelihoods of those working in the ﬁsheries sector. Once again, the Caribbean is leading the way in providing solutions for disaster risk financing. The Caribbean is the first region globally to develop and implement parametric climate risk insurance for the fisheries sector. For the first time, vulnerable fishing communities will have access to insurance developed specifically for their needs, protecting their livelihoods and playing a key role in closing the protection gap.
Contributed by CCRIF SPC
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