Countries in the Caribbean and CentralAmerica are highly vulnerable to the adverse effectsassociated with earthquakes, tropical cyclones, and othermajor hydro-meteorological events such as excessiverainfall. Aftermath of disasters typically place significantstrain on the fiscal systems of affected countries.Consequently, ministers of the Central American integrationsystem (SICA) and Caribbean community (CARICOM) countrieshave expressed a strong intention to collectively manage thedisaster risk. By understanding the loss potential ofdisasters caused by natural events and the extent of publicintervention in recovery and reconstruction efforts,governments can ascertain their respective contingentliabilities. Sovereign disaster risk financing and insurancecan also safeguard against sudden macroeconomic shocks thatnegatively impact fiscal performance, and in turn, economicdevelopment. Caribbean and Central American governments areconstrained in their ability to access quick liquidity toabsorb fiscal shocks associated with natural hazard impactsbecause they have limited ability to create contingencyfunds, and limited capacity for external borrowing. TheWorld Bank in partnership with the United States departmentof treasury assessed various options, which guided Ministersof Finance of Central America, Panama, and the DominicanRepublic (COSEFIN) to identify the Caribbean catastropherisk insurance facility (CCRIF) as the best option. TheCCRIF provides cost-effective and fast-disbursing liquidity,and is an efficient way to finance a liquidity gap arisingin the immediate aftermath of disaster.
PDF
download
878987797
028-85220240
