RG-T3406 : Advisory Services to Create the Caribbean Water Utilities Mutual Insurance
Project Status: Approved
The objective of these Advisory Services (AS) is to perform feasibility analyses for the operationalization of a Mutual for Caribbean Water and Sewerage Companies to insure Climate Related Risks (the Mutual). It is expected that the Mutual will generate an impact reducing the recovery time of water and sanitation systems after a hurricane and increase their resilience against such events. The specific objectives of the AS are to: i) structure a facility to support mutual assistance and post disaster support from participating water utilities through the availability of funds for travel, lodging and reimbursement of expenses allowing the water operators of the Caribbean region to mobilize quickly to support one of their peers in case of crisis; and ii) structure a parametric insurance of losses –amount set in function of the magnitude of the climate events- to be defined through risks to be reinsured, thus requiring a minimal equity component. It is expected that this support will result in a new innovative financial mechanism having an impact in the resiliency of Caribbean water utilities. Reinsurers have considerable information on events and their impacts; their participation would create a better understanding of the risks, helping to mitigate/reduce those reinsured. The Mutual structure will promote the adoption of best practices as increase resiliency would result in lower premium. The Mutual will result, at the same time, in an opportunity to scale-up resiliency and adaptation investment and will generate a climate finance market in which both CDB and IDB would finance the resiliency investments required from the utilities.