In the aftermath of disaster, vulnerable countries often struggle to rebuild. Nearly two weeks ago, Hurricane Dorian made a historic landfall on the Bahamas. A Category 5 storm, it devastated the island country in a way not seen before. Though an overabundance of supplies and support have flowed into the Bahamas’ islands, the government, like those of others post-natural disaster, has been slow to get support to the thousands of Bahamians in need of food and shelter. In many cases, impassible roads have hindered attempts to distribute aid. However, parametric catastrophe pool (CPs) insurance payouts can offer the Bahamas – and other vulnerable countries – a way to speed up their response times to restore critical services, increasing their resilience in the face of climate change. 

Overhead view of a row of damaged structures in the Bahamas. Photo by US Coast Guard Petty Officer 2nd Class Adam Stanton.
Overhead view of a row of damaged structures in the Bahamas from a Coast Guard Elizabeth City C-130 aircraft after Hurricane Dorian. (U.S. Coast Guard photo by Petty Officer 2nd Class Adam Stanton.)

Hurricane Dorian and the devastation of the Bahamas represents a grim future of extreme weather severely exacerbated by climate change. Stalled Atlantic storms – or storms that move slowly – are becoming more common, caused by the slowing of upper-level steering winds over land. Combined with an increased amount of rainfall, hurricanes and other natural disasters are becoming stronger and cause more destruction than ever before. And the effects are visible. Hurricane Dorian moved over the Bahamas at a rate of only 1mph, sending storm surges swelling past 20 feet and winds flying at 185mph. As a result, over 13,000 homes were demolished and 70,000 Bahamians were rendered homeless. Though the reported death toll lies at 50 as of September 13, nearly 2,500 people are officially registered as missing, and volunteer emergency responders estimate the death count to be much higher. 

While the victims of natural disasters are often frustrated by the slow and usually underfunded recovery process, catastrophe pools (CPs) represent a fast solution. CPs are a form of parametric insurance, or a form of insurance that offers funds based on metrics predetermined by a country’s risk. Rather than basing insurance payouts on damage assessments and loss values, which may take years to complete, they are based on the magnitude of the event. This allows countries immediate access to funds soon after a major disaster. Often, these funds are used for pressing needs, such as clearing debris and running hospitals. The Caribbean Catastrophe Risk Insurance Facility (CCRIF), a sovereign catastrophe pool established in 2007 to provide funds for countries hit by cyclones, has offered the Bahamas approximately $11 million. While the archipelago has three zones that maintain policies with CCRIF, the northwestern zone of the country, which includes the Abaco Islands and Grand Bahama, triggered the funds. 

CPs can help instill resilience in a number of ways. Not only do they help provide disaster relief quickly, they also create incentives for countries to invest in risk reduction and systemic resilience. Because CPs are highly collaborative, they tend to require countries to create comprehensive disaster plans, which strengthens disaster preparedness. Additionally, they can lead to the creation of public goods. For example, the Pacific Risk Information System was created by the members of a CPs, providing Pacific Island countries with disaster risk modeling and assessment tools. This collaboration also helps to facilitate strong political commitments between countries, as they can only succeed when countries coordinate their preparations. One criticism of CPs is that they should only be one part of a “risk-layering” approach, or preventing risk through a number of different hazard mitigation efforts. However, catastrophe pools offer countries a rapid first step to recovery, bolstering resilience in places that need it the most.


Sources and Additional Reading

NPR – Getting Aid To Bahamas Is A Logistical Nightmare As Support Systems ‘Do Not Exist

The Guardian – ‘We have to give paradise a hand’: Dorian aid operation proves a huge logistical challenge

ReliefWeb – Hurricanes threaten Caribbean countries still recovering from 2017 storms – officials

Risk & Insurance – When Disaster Strikes, Parametrics Speed Recovery

NBC News – In Abaco Islands, the letter D marks the site of a grim recovery effort

Insurance Journal – Update: Parametric Catastrophe Pool, CCRIF, to Provide Rapid Payout for Bahamas After Dorian

World Bank – What Makes Catastrophe Risk Pools Work: Lessons for Policymakers

PCRAFI – Pacific Risk Information System