Pacific Disaster Risk Financing and Insurance Program

PACIFIC CATASTROPHE RISK INSURANCE PILOT (PCRIP)

COUNTRY CONSULTATION REPORT

Prepared by Savenaca Narube

Suva, Fiji, 2015 PCRIP Consultation Report

All rights for commercial/for profit reproduction or translation, in any form, reserved. SPC authorises the partial reproduction or translation of this material for scientific, educational or research purposes, provided that SPC and the source document are properly acknowledged. Permission to reproduce the document and/or translate in whole, in any form, whether for commercial/for profit or non-profit purposes, must be requested in writing. Original SPC artwork may not be altered or separately published without permission.

Original text: English

Secretariat of the Pacific Community cataloguing-in-publication data

Narube, Savenaca

Pacific Disaster Risk Financing and Insurance Program: Pacific Catastrophe Risk Insurance Pilot (PCRIP) – Country Consultation Report / prepared by Savenaca Narube

1. Risk management — Oceania. 2. Disasters — Oceania. 3. Environment — Oceania. 4. Risk management — Oceania.

I. Narube, Savenaca II. Title III. Secretariat of the Pacific Community

577.22 AACR2

ISBN: 978-982-00-0920-2

PCRIP Consultation Report

Contents

Abbreviations ...... iv Acknowledgements...... iv Disclaimer ...... v Summary of findings ...... 1 1. Introduction ...... 3 2. Consultations ...... 4 2.1 Aim of the consultations ...... 4 2.2 Consultation report ...... 5 3. Lessons learned from the Pacific Catastrophe Risk Insurance Pilot ...... 5 3.1 Demand for catastrophe risk insurance is unanimous ...... 5 3.2 A holistic approach to disaster risk financing will facilitate understanding ...... 6 3.3 Building country ownership is an ongoing effort ...... 6 3.4 Capacity building is an ongoing challenge ...... 8 3.5 Increasing the pool of risks to remain a medium-term goal...... 8 3.6 Sustainability critically depends on the affordability of premiums...... 9 3.7 Mobilisation of donor support to be collectively promoted ...... 10 3.8 Coverage should be revisited and embedded ...... 10 3.9 Regional approach to catastrophe insurance and climate change ...... 11 3.10 The strategic importance of a mechanism to cover mid-level disasters is high ...... 12 3.11 Attachment and exhaustion points to be clarified ...... 12 3.12 Review of the loss estimation model is warranted ...... 12 4. Options for the future of the PCRIP at the end of the third season ...... 14 5. Risks to sustainability ...... 14 6.Views on the proposed financial products of the DRFI ...... 15 6.1 Support for a mutual insurance fund ...... 15 6.2 Search for a cost-effective mechanism ...... 15 6.3 Support for capacity building under the DRFI ...... 16 7. The structure of the management entity for the PCRIP ...... 16 7.1 In-principle support for the separate management entity, but roles to be clearly defined ...... 17 7.2 Costs of management entity must be shared ...... 17 7.3 Link the decision on the management entity to the pilot program ...... 18 7.4 World Bank to continue to intermediate the scheme ...... 18 7.5 Options for the structure of the management entity ...... 19 7.6 Full feasibility study to be undertaken ...... 19 Annex 1: List of people met with during consultations ...... 20 Annex 2: Bibliography ...... 22

iii

PCRIP Consultation Report

Abbreviations

ADB: Asian Development Bank CCRIF: Caribbean Catastrophe Risk Insurance Facility DRFI: Pacific Disaster Risk Financing and Insurance Program ETF: Emergency Trust Fund GCF: Green Climate Fund GDP: Gross Domestic Product GFDRR: Global Facility for Disaster Reduction and Recovery FEMM: Pacific Islands Forum Economic Ministers Meeting IDA: International Development Association JICA: Japan International Cooperation Agency MIF: Mutual insurance fund MOF: Ministry of Finance PICs: Pacific Island countries PICTs: Pacific Island countries and territories PIF: Pacific Islands Forum PIFS: Pacific Islands Forum Secretariat PCRAFI: Pacific Catastrophe Risk Assessment and Financing Initiative PCRIP: Pacific Catastrophe Risk Insurance Pilot PREP: Pacific Resilience Program TA: Technical assistance TC: Tropical cyclone TOP: Tongan Pa’anga UNFCCC: United Nations Framework Convention on Climate Change WB: World Bank

Acknowledgements

The consultant expresses his appreciation to all those that provided their valuable time to meet with him. Appreciation is also extended to the World Bank Group and the Secretariat of the Pacific Community for their assistance and guidance in this assignment.

This report was produced with the financial support of the Government of Japan, through the Pacific Disaster Risk Financing and Insurance multi-donor trust fund and the Global Facility for Disaster Recovery and Reconstruction (GFDRR), and the World Bank, and with logistical support from the Secretariat of the Pacific Community (SCP).

PCRIP Consultation Report

Disclaimer

This report has been prepared by the consultant, Mr Savenaca Narube, for SPC and the World Bank.

The report includes the views and recommendations of the consultant and does not necessarily reflect the views of SPC or the World Bank, or indicate a commitment to a particular policy or action.

While reasonable efforts have been made to ensure the accuracy and reliability of the material in this report, SPC and the World Bank cannot guarantee that the information contained in the report is free from errors or omissions. SPC and the World Bank do not accept any liability, contractual or otherwise, for the contents of this report or for any consequences arising from its use.

PCRIP Consultation Report

Summary of findings

The third season of the Pacific Catastrophe Risk Insurance Pilot (PCRIP) ends in October 2015. In anticipation of the conclusion of the third season of the PCRIP, The World Bank, together with its partner in the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) project, the Secretariat of the Pacific Community, appointed an independent consultant1 to conduct high-level consultations on the establishment of a management entity for the Pacific Disaster Risk Financing and Insurance Program (DRFI). The main aim of the consultation was to seek the views of participating countries on the establishment of a separate entity to manage the PCRIP and the DRFI, taking over the current intermediary role of the WB. However, to put the issue into context, it was necessary to gauge the countries’ demand for catastrophe insurance and their commitment to PCRIP. It was an opportune time to seek feedback on the lessons learned from the PCRIP, to help shape the way forward on future options for the provision of catastrophe insurance. The consultations also solicited preliminary views on the products that are being developed in the DRFI.

The major findings of the consultations were as follows:

a) The demand for catastrophe insurance is unanimous. Participating countries appreciated its quick cash flow support when a disaster strikes. They also appreciate the flexibility that the pay-out offers to governments to spend in areas they consider of priority. b) There have been important lessons learned from the pilot program on the sustainability of PCRIP. Foremost among these are the subsidy on premiums, extent of coverage, ownership and the loss estimation. A permanent arrangement will need to be found for the subsidy to continue. c) Despite training and workshops held at the commencement of the PCRIP, the ownership of the PCRIP has been weak, stemming primarily from the lack of understanding of the fundamentals of the facility. Coverage is the most misunderstood issue in the program. In an actual event, the estimation of loss by the model was found to be far less than the government estimates. These issues need to be reviewed, and adjustments made if necessary. Countries should prepare an integrated disaster risk financing strategy, as opposed to action plans, which many already have. The preparation should be undertaken in an inclusive process to involve all of the relevant departments in government. d) The countries unanimously support the continuation of the catastrophe insurance. However, there was an even split between those that wanted the pilot scheme to continue and those that wanted it to become permanent. The former group pointed to the residual issues on sustainability that still need to be resolved, as discussed in (b), above. The latter group argued that three years of being a pilot program is sufficient, and the residual issues can still be resolved within a permanent facility. They pointed out that countries are committed to the insurance. e) Most of the countries are firmly committed to paying their subsidised contribution to the premium and the higher contributions to the premium that they are expected to pay in the next three years.

1 Mr Savenaca Narube is a private consultant. He was formerly Governor of the Reserve Bank of Fiji and Permanent Secretary for Finance. He has also worked at the World Bank and the International Monetary Fund in Washington DC.

PCRIP Consultation Report f) Countries unanimously called for a mechanism to cater for regular but lower impact disasters. The strategic importance of such a cover is significant. It will go a long way to removing the negative perception that the PCRIP is not responsive to the needs of the countries. It will also avoid the current political hazard of countries not receiving a pay-out because of the parametric calibration of the event. g) The countries fully supported, in principle, the introduction of a mutual insurance fund, and await further details. They asked that the concept of self-insurance be explored as soon as possible. h) The countries supported the financial capacity building under the DRFI through technical assistance and the financial management manual. These have helped them in improving planning, drafting regulations and strengthening financial management. i) The countries supported, in principle, the establishment of a separate management entity of the PCRIP and DRFI. They emphasised that the most cost-effective option should be found for the management entity to avoid burdening countries with large overhead costs. They suggested that a full feasibility study should be undertaken to determine the functions, structure and cost of establishing a management entity.

PCRIP Consultation Report

1. Introduction

The Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) is a comprehensive program on disaster risk management and climate change adaptation in the Pacific. One of the applications of PCRAFI is the Pacific Disaster Risk Financing and Insurance Program (DRFI), which aims to increase the financial resilience of Pacific Island countries (PICs) to natural disasters and to improve their financial capacity to respond to them. The DRFI comprises two components. One is technical assistance (TA) to strengthen public financial management after natural disasters. The other is the Pacific Catastrophe Risk Insurance Pilot (PCRIP), which provides market-based sovereign catastrophe risk insurance solutions.

The PCRIP commenced in early 2013, after more than a year of data collection, technical analysis and negotiations led by the World Bank Group (WB). This first season of the Pilot provided catastrophe risk insurance for the period January to October 2013 and covered five PICs – Marshall Islands, Samoa, Solomon Islands, Tonga and Vanuatu. The PCRIP was supported by the Government of Japan, the WB, the Global Facility for Disaster Reduction and Recovery (GFDRR), and the Secretariat of the Pacific Community (SPC). Under the PCRIP, the WB transferred a pool of catastrophe risks to the international reinsurance market.

The second season of the PCRIP provided catastrophe risk insurance for participating countries from October 2013 to October 2014. During this season, Solomon Islands withdrew from the pilot program, following non-pay-out after two natural disasters. During this second season, Cook Islands joined the program, maintaining the number of participating countries at five. The PCRIP is now into its third season, with catastrophe risk insurance for the five participating countries ending in October 2015.

The high vulnerability of Pacific Island countries and territories (PICTs) to natural disasters, such as tropical cyclones, earthquakes and heavy rainfalls, is well known. Due to their generally small sizes, geographical locations and wide dispersion of islands, PICTs face many challenges in managing natural disasters. The lack of export diversification and narrow economic base in many PICTs severely limits their debt exposures and their ability to enter into market-based financial arrangement to fund the costs of natural disasters. Due to their narrow revenue bases, many PICTs have a low capacity to set aside adequate budget resources for disaster risk management. These PICTs are, therefore, heavily reliant on development partners to provide much-needed assistance to deal with natural disasters. However, this financial support takes time to arrange and is generally targeted at specific sectors. Past disasters have greatly disrupted government services, due to the need to reallocate resources to meet emergency demands. By placing catastrophe swaps with the private reinsurance market, the PCRIP helps countries respond to emergency requirements through access to immediate cash flow after natural disasters.

PCRIP Consultation Report

2. Consultations

In anticipation of the conclusion of the third season of the PCRIP (ending in October 2015), the WB and SPC appointed an independent consultant to conduct high-level consultations on the establishment of a management entity for the DRFI that could take over the current intermediary role of the WB. Under a work plan prepared by the consultant and endorsed by the WB and SPC, the consultant visited four of the five PICs participating in the PCRIP – Cook Islands, Samoa, Tonga and Vanuatu. Due to time limitations, the consultant was not able to visit Marshall Islands. Marshall Islands was asked to answer a set of questions. The consultant also visited Solomon Islands, as it participated in the first season of the pilot program. Although Fiji is not a part of the PCRIP, the consultations also included Fiji, which has been considering joining the program.

The consultant met with representatives of ministries of finance, national disaster management departments, central banks and environment departments. In Solomon Islands and Tonga, consultations were also held with the country offices of the WB and the Asian Development Bank (ADB). The list of people met with during the consultations is included at Annex 1.

2.1 Aim of the consultations

The major aim of the consultations was to seek the views of participating countries on the establishment of a separate entity to manage the PCRIP and the DRFI. However, it was initially necessary to gauge the countries’ demand for catastrophe insurance and their commitment to the PCRIP. The consultations were an opportune time to seek feedback about the lessons learned from the pilot program to help shape the way forward for catastrophe insurance in the Pacific. The consultations also solicited preliminary views about the products that are being developed in the DRFI.

The consultations sought responses in relation to three issues:

a) Lessons learned from the Pacific Catastrophe Risk Insurance Pilot (PCRIP): The PCRIP was extended for a third season at the request of the Pacific Islands Forum Economic Ministers Meeting (FEMM), in Honiara in 2014. Cook Islands commenced its participation during the second season, while Solomon Islands withdrew during this season. Marshall Islands, Samoa, Tonga and Vanuatu have participated throughout all three seasons. Solomon Islands withdrew due to its ineligibility to draw on the facility after an earthquake in 2013 and floods in 2014. Tonga was the first country to draw on the facility, after tropical cyclone (TC) Ian, and Vanuatu accessed the facility after TC Pam in 2015. The consultations sought countries’ views about their experiences of the PCRIP and about the future of the Pacific Disaster Risk Financing and Insurance Program after the pilot ends in October 2015.

PCRIP Consultation Report

b) The views on the proposed financial products of the DRFI: The PCRIP is part of the broader Pacific Disaster Risk Financing and Insurance Program. As explained in the Introduction, the DRFI was developed to safeguard the financial position of governments in times of natural disasters. In addition to the PCRIP, the other component of the DRFI is technical assistance to strengthen financial management after disasters. A mutual insurance fund (MIF) is one of the financial products that are being developed under the DRFI. The consultations sought the views on existing and proposed products under the DRFI. c) The structure of the management entity for the PCRIP: The WB currently mediates for the PCRIP between Pacific Island countries (PICs) and the reinsurance market. The main focus of the consultations was to examine the options for the structure of the management entity that would take over the intermediation role of the WB.

2.2 Consultation report

This report covers the issues that were highlighted in the consultations organised under the three focus areas described above. While the consultations centred on the PCRIP, as required under the terms of reference (TOR) of the consultant’s engagement, they also dealt with the second component of the DRFI – the provision of technical assistance to assist public financial management after natural disasters. This report is a consolidated summary of the consultations. This report is not a review of the PCRIP, which is well covered in the recent review of the PCRIP by the WB and Japan International Cooperation Agency (JICA) (World Bank 2015). This report focuses on the lessons learned during the three seasons of the PCRIP, and suggests possible ways forward in respect of catastrophe insurance.

3. Lessons learned from the Pacific Catastrophe Risk Insurance Pilot

3.1 Demand for catastrophe risk insurance is unanimous

The consultations unanimously validated the demand by PICs for catastrophe risk insurance. PICs are fully aware of their geographical vulnerability to natural disasters, especially cyclones, earthquakes and floods. Most PICs are at the high end of the global vulnerability index. Recent disasters indicate that the probabilities of the occurrence and the intensity of future events are increasing. All countries that were consulted indicated that they decided to join the pilot program in order to transfer some of these risks to the insurance market. While there are some issues around the extent to which all relevant agencies were involved in country decisions to join the PCRIP (as discussed later in this report), the countries were unanimous in defending their decisions based on the high degree of vulnerability that they face. Most countries cited the peace of mind that the insurance product brings to disaster risk management.

Given PICs’ traditional links and relationships, it is well known, that, in the event of a disaster, donors readily come to the assistance of PICs. This assistance is greatly appreciated by PICs. However, the countries participating in the PCRIP made it clear that they consider that they must be responsible for taking their own actions to pre-emptively manage disasters, rather than to perpetually depend on donors to come to their assistance. The advantages of the PCRIP lie not only in providing immediate cash flow assistance when countries most need it, but also in

PCRIP Consultation Report

providing flexibility to governments to expend these financial resources in areas which they consider to be of priority. These advantages, of timeliness and flexibility, were validated in the pay-outs to Vanuatu and Tonga (the only two countries that have, as yet, received pay-outs from the PCRIP) within 10 days of the date that the applications were received by the WB.

The consultations confirmed that the governments of participating countries strongly support the PCRIP. Unfortunately, the consultant did not meet with any of the ministers for finance, mainly due to their absence from their respective countries during the consultation period. However, discussions with high-level officials revealed that the finance ministers and Cabinet members are aware of the PCRIP, although awareness of the PCRIP needs to be enhanced due to ministerial and government changes in some countries since the PCRIP commenced in 2013. Finance secretaries agreed to fully brief their ministers before the Forum Economic Ministers Meeting in October 2015.

3.2 A holistic approach to disaster risk financing will facilitate understanding

While PICs that were surveyed acknowledged the need for catastrophe risk insurance, countries have demonstrated misconceptions about several of its aspects, especially its coverage. It was evident from the consultations that these misconceptions could be minimised if the PCRIP is presented and discussed as part of the country’s integrated financial risk management package, which includes the levels of risk that are retained, the limitations of the insurance cover and the instruments that are aimed at filling these gaps. The PCRIP has not been designed to cover all disasters, or to provide finance for recovery and reconstruction. It is intended to provide immediate cash injections to assist governments in the emergency response phase, and should be combined with other financial solutions. The review of documents indicated that presentations of this integrated approach were given during the technical analysis and in the processes of securing government support before the placement of risks in the market. The fact that misconceptions exist around coverage under the PCRIP may be because countries did not fully understand the limitations of the entire disaster risk financing package.

As stated above, the decisions of the original five Pacific countries to join the PCRIP reflected their high degree of vulnerability to natural disasters. However, the consultations indicated that, in many cases, the decision to join the PCRIP was greatly influenced by the availability of the insurance cover at no cost in the first year and the subsidised premiums thereafter. It was evident from the consultations that the countries themselves did not undertake an integrated and rigorous identification of the risks they face and the adequacy of their risk retention strategies. Therefore, there is a clear need for countries to now develop, in an inclusive process, an integrated financial strategy on disaster risk management which they can use to determine the level of risks that they need to transfer to the market through the PCRIP. The preparation of this overarching financial strategy is part of the wider DRFI, and it would naturally be driven from ministries of finance. However, the development of the financial strategies would benefit greatly from the participation of other relevant agencies. 3.3 Building country ownership is an ongoing effort

The WB emphasised the importance of ownership in sustaining the program. It engaged decision-makers, through training and workshops, to help the countries make their own decisions about joining the PCRIP and choosing the appropriate level of coverage. Cabinet-

PCRIP Consultation Report

level approval was required for each country to participate in the PCRIP, and legal clearances were obtained from government legal departments.

The technicalities of placing parametric catastrophe insurance are complex, compared to the conventional indemnity option. But the level of complexity is multiplied when placing the pool of risks of a group of small island countries in the market for the first time, which necessitated innovative approaches.2 The WB had contributed, through its leadership, management and technical support, to bringing the PCRIP to fruition. It is understood that, as part of the capacity- building program, countries were presented with detailed information and training on the PCRIP, which included simulations that allowed countries to evaluate different policy scenarios.

Despite this training, the consultations revealed a considerable lack of understanding at the country level about the details of the PCRIP. This could be attributed to a number of factors. At a general level, the lack of absorption reflected the inadequate capacity within PICs, not only in respect of the number of people, but also in respect of technical capacity.

At the same time, the consultations heard that the technical experts may not have clearly emphasised all of the critical information about the cover and the trigger points. At the country level there was an over-reliance on the experts to determine the outcome of the analysis and the decision that was ultimately taken by the countries. This reflected the general tendency in the Pacific to defer to experts in the face of a lack of local technical capacity. There was an absence of independent evaluation by the countries. It appeared that many respondents did not pay close attention to, or did not understand the limitations of, the coverage or the estimated levels of damage and pay-out. These lacks in the decision-making process in joining the pilot contributed to Solomon Islands’ decision to withdraw from the PCRIP. Vanuatu had also expected a larger pay-out than what it actually received.

It also appeared that, in most cases, the cost-benefit analysis that was carried out when the country decided to join the PCRIP may have been limited to the ministry of finance, and did not include all of the government agencies that were directly related to pre- and post-disaster management. Now that the pilot is in its third season, it is an opportune time for the ministries of finance to share their experiences with the program across government departments, in order to strengthen ownership and advocacy. It will be very useful if this sharing is done before the FEMM in October 2015, to allow the country delegations to clearly articulate the collective views at the meeting. In addition, a program to improve country ownership can be designed and implemented to take into account the lessons learned in the last three years.

Encouragingly, understanding of the PCRIP has improved at the country level since the first season of the pilot program, through the yearly workshops and materials that have been distributed by the WB, and these awareness-raising activities need to continue. The frequent changes in key decision-makers in government have also affected continuity, and the involvement of other departments would help in this regard. It may also be useful to nominate a team in each country, made up of the ministry of finance and other agencies, to be the country experts on the insurance, if this has not been done already.

2 Pacific Catastrophe Risk Insurance Pilot; From Design to Implementation, WB and JICA, July 2015.

PCRIP Consultation Report

3.4 Capacity building is an ongoing challenge

Capacity building is obviously an important component of the PCRIP. Its modality and approach will largely determine its effectiveness. As shown in the consultations, despite the initial training and workshops, the retention of knowledge at the country level is low. One of the major challenges is in the movement of staff within government, which often leads to the loss of people that had attended past capacity-building initiatives. In addition, the wrong people are often sent to the training, for a range of reasons. The participating countries stated that, while a regional approach to capacity building is relevant, the best modality is to deliver country-specific training programs, where knowledge is transferred to a larger pool of people, and to the right people. The establishment in each country of a multi-ministerial core group for disaster risk financing among all relevant ministries will help in retaining knowledge and improving continuity.

3.5 Increasing the pool of risks to remain a medium-term goal

The PCRIP utilises the insurance principles that the pooling of risks makes the product more attractive to the market and that the likelihood of catastrophes striking many countries in one insurance period is extremely low. These principles provide a basis for insurers to bid for the pool of risks, which led to the WB successfully placing the parametric cover at competitive prices. Due the small scale of the insurance sector in the Pacific, it would be practically impossible for countries to individually approach the market at an affordable premium. Risk pooling also brings efficiencies, and avoids reinsurers dealing with many small islands. These efficiencies flow on as lower premiums. Pooling of risks requires that countries work collaboratively. Countries are dependent on each other to complete the legal and administrative arrangements required by the insurance in a timely fashion. This collective approach can present challenges, as demonstrated by Samoa not being eligible for a pay-out in 2013 due to country delays in joining the PCRIP.

Conceptually, in insurance, the larger and more diversified the risk pool, the more viable insurance becomes to the reinsurers, and this would be expected to lead to lower premiums for a given level of coverage. The entry of additional countries to the pool will raise the collective risks of the group. It would therefore be beneficial if technical simulations are done to evaluate the impact of other countries joining the insurance, such as Fiji and Papua New Guinea (PNG). However, at face value, in the long term it is advantageous to the countries participating in the PCRIP if other PICs join. Of those PICs that have yet to join the PCRIP, Fiji has been seriously considering the costs and benefits of disaster risk insurance. Based on historical trends, the Fiji Ministry of Finance (MOF) had undertaken basic simulations on the possible pay-out against different premium scenarios. The analysis assumes that Fiji pays the full premium under the current engagement point, which appears to be a sensible approach. Fiji’s analysis has not been shared outside of the MOF, and it would be useful to seek the views of the related agencies in government on these simulations. The analysis also needs to be independently reviewed to test its rigour and methodology.

Countries that now wish to join the PCRIP have a comparative advantage, as they can learn from experiences of the pilot program. Like other countries, Fiji will need to prepare an integrated financial risk strategy and identify the financial instruments that it has available to mitigate these risks. There are several agencies that are directly involved with post- and pre- disaster programs, and these are located in different ministries. As pointed out above, there is

PCRIP Consultation Report

obviously a need to be inclusive in developing an integrated disaster risk financing strategy, seeking the participation of all relevant agencies.

3.6 Sustainability critically depends on the affordability of premiums.

The pilot countries extended their appreciation to the Government of Japan for its valuable assistance in sharing the burden of the premiums and extending it to the third season. Four countries mentioned that, without it, they would not have been able to participate in the PCRIP. Japan covered the full premium in the first year of the pilot program. The level of subsidy dropped in the second season (2013–2014), and countries made a nominal contribution of USD 20,000 to the cost of premiums in that year. The nominal contribution per country increased to USD 40,000 for the third season of the pilot. Since joining the PCRIP in the second season, Cook Islands had been paying the full premium of USD 100,000. All countries expressed agreement to contribute paying their nominal contribution to the premium to demonstrate their commitment to managing risks of disasters in their respective countries.

It was not surprising that countries that had joined the PCRIP believed that the sustainable way forward for it hinges on the affordability of the premiums. This was the single-most important issue from the consultations. Many PICs run very tight budgets due to their narrow revenue bases, which are further eroded by exemptions. Their major source of tax revenue is consumption taxes, which are impacted by pronounced swings in economic performance. Moreover, their total debt levels are high by international standards for small fragile economies. Many depend heavily on the assistance of development partners to fund their capital budget. As small developing nations, they face many competing priorities for their meagre resources. The fiscal space is extremely tight, approaching non-existent in some cases. The full premium therefore imposes a heavy fiscal burden on their small budgets. The premiums are determined by several factors, including coverage, attachment points and exhaustion points. The premiums are also sensitive to the total risks in the pool. Countries indicated that they would seriously evaluate their ongoing participation if the premium ceases to be subsidised.

The subsidy by the Government of Japan is expected to end at the end of the third season, in October 2015. It is imperative for the sustainable future of the insurance scheme that a permanent subsidy arrangement be found. The countries welcomed the WB initiative to use each country’s International Development Association (IDA) allocation to subsidise the premium through the Pacific Resilience Program (PREP). However, the level of this subsidy, and the countries’ eligibility, are presently unclear. The countries’ expectations are that the IDA option will at least match the subsidy that is currently paid by Japan. Some participating countries and potential participants are not eligible to access IDA funding, and some are eligible only for a blend of grants and loans. As its per capita income is too high for WB eligibility, Cook Islands is not a member of the World Bank. However, Cook Islands made clear in the consultations it they wished to be considered for the subsidy scheme.

Using IDA finance to fund the majority of the insurance premium, coupled with increasing nominal contributions from countries participating in the insurance, has secured finance for the next three years. Some countries, such as Samoa, Tonga and Vanuatu, are committed to increasing their contributions according to the agreed schedule. Cook Islands is also committed to paying the current premium level.

PCRIP Consultation Report

Participating countries expressed a willingness to seek their own financing to subsidise the premium. This is discussed in section 3.7, below.

3.7 Mobilisation of donor support to be collectively promoted

The need to increase the level of donor support for the broader DRFI was raised by many of the country respondents. These respondents believed that donor participation in the insurance scheme, in particular, would be an appropriate mechanism to provide immediate cash flow to fund the emergency responses to severe disasters. As highlighted above, the affordability of the premiums is the most important factor limiting participation in the insurance scheme. Other than donor funding from Japan, donor support has not been forthcoming in the three years of the pilot program. Almost all of the countries participating in the program pointed to the absence of traditional donors in supporting an important initiative such as the PCRIP.

The PCRIP may not be in line with the strategic focus of some donors. Donors may prefer to directly support post-disaster events, where they can influence the amount and the areas of spending. Visibility may also be a factor. Donors may wish to assist in all types of disasters, rather than only those at the high end of the scale. In any case, donor assistance to the PCRIP, or to the broader DRFI, may need to be deducted from countries’ quotas. Donors’ priorities may not include disaster insurance. These reasons are valid, and need to be understood in order to design the product to better fit into the strategic focus of donors.

After three years of operation of the PCRIP, this is an opportune time to collectively engage potential donors in the region to support the scheme. The use of donors’ regional allocation rather than bilateral grants can be explored. The best modality of support, according to the participating countries, is for donors to subsidise the premiums. Countries agree that they should raise the profile of the scheme in their round table meetings with donors and in regional forums such as FEMM, where countries would need to identify that supporting PCRIP is one of their national priorities. A suggested option was for donors to support a basic cover and for countries to pay for levels of cover that they would like to receive, over and above the basic package.

3.8 Coverage should be revisited and embedded

The consultations revealed that coverage was the most misunderstood issue in the PCRIP. The review of the PCRIP3 stated that extensive workshops were held, in which countries presented their existing arrangements for financing disaster losses and discussed options for insurance cover. Simulations were done to explore the effects of different levels or tiers of coverage. It is understood from the document review that the coverage levels were determined by countries, after using the diagnostic tools to explore various options. The coverage levels of countries revealed in the review of the PCRIP are presented below.

3 Pacific Catastrophe Risk Insurance Pilot; From Design to Implementation, WB and JICA, July 2015.

PCRIP Consultation Report

Table 1: Countries’ coverage levels in the PCRIP

Pilot year one Pilot year two Pilot year three January–October 2013 November 2013–October 2014 November 2014–October 2015 Cook Islands No cover Cook Islands 10-year attachment Cook Islands 10-year attachment Marshall Islands 15-year attachment Marshall Islands 15-year attachment Marshall Islands 15-year attachment Samoa 20-year attachment Samoa 20-year attachment Samoa 20-year attachment Solomon Islands 10-year attachment Solomon Islands 10-year attachment Solomon Islands No cover Tonga 10-year attachment Tonga 10-year attachment Tonga 10-year attachment Vanuatu 10-year attachment Vanuatu 15-year attachment Vanuatu 20-year attachment USD 45 million aggregate coverage USD 67 million aggregate coverage USD 43 million aggregate coverage Source: Pacific Catastrophe Risk Insurance Pilot; From Design to Implementation, July 2015

As the PCRIP comes to the end of its third season, with experiences of actual events, the extent of coverage will continue to be a contentious issue. Many respondents felt that financing instruments should be found to cover all disasters. Some respondents, especially those from outside ministries of finance, were surprised that PCRIP did not cover them for lower-level disasters. However, the document review clearly shows that the PCRIP was not designed to cover all disasters. This perception gap could be due to the lack of appreciation by countries of the nature of coverage. Again, this may signal the need to secure a collaborative decision by country governments on the level of coverage that best fits countries’ requirements in the broader context of their disaster risk financing strategies. It is also possible that the root of this ongoing perception gap is the political fallout that occurs when there is no pay-out after a disaster. Countries pointed out that it could be an occupational hazard when the finance secretary explains to Cabinet that the country has not qualified for a pay-out from the insurance scheme after a disaster because the winds were not strong enough. It is therefore essential that the political leaders are thoroughly briefed about the coverage and pay-outs under the scheme.

Following the withdrawal of Solomon Islands from the scheme, and given Vanuatu’s expectation of a higher pay-out than it received, many respondents felt that all countries should review their respective levels of cover.

3.9 Regional approach to catastrophe insurance and climate change

Several countries referred to the connection between climate change and disaster risk insurance. These countries argued that it was universally accepted that the vulnerability of small island countries to natural disasters had been multiplied by the impact of climate change, which affected the regularity and the intensity of natural disasters in the region. The impact of climate change is becoming increasingly unpredictable. It puts pressures on the already high level of PICs’ vulnerability. The countries consistently argued during consultations that international conventions recognise the principle that polluters were responsible for paying for the adverse impact of their actions on the victims of climate change. The polluters pay principle is now universally adopted. The setting up of global funds for climate change adaptation and mitigation, such as the Green Climate Fund (GCF), represents the application of this principle. Several countries emphasised the need to honour the commitments to the United Nations Framework Convention on Climate Change (UNFCCC) and other global conventions.

During the consultations, PICs emphasised that they were the victims of this pollution and, in the current structure of PCRIP, the victims are burdened with paying a portion of the premiums. Countries felt that, instead, the polluters should be asked to pay for the entirety of the

PCRIP Consultation Report

premiums. They stated that this linkage between climate change and the tropical cyclones in PCRIP particularly, and PCRAFI generally, was not emphasised enough in the pilot program. Access to global climate change funds is difficult. But, encouragingly, some PICs are now able to access these funds at the country level. However, it would carry more weight if the approach to fund the insurance premiums from global climate change funds is undertaken at the regional level rather than by individual countries. Regional organisations, such as SPC and the Pacific Islands Forum (PIF), should be asked to take a lead role in this regional initiative. Realistically, from past experience, this option may take time to arrange.

3.10 The strategic importance of a mechanism to cover mid-level disasters is high

It was evident from the consultations that a mechanism must be found to cover the more regular and medium-level disasters. From actual events, some of the cyclones below category four can be very damaging and costly. Examples include tropical cyclone Vania in 2010, in Vanuatu, and tropical cyclone Evan in 2012, in Fiji and Samoa. During these events, the delay in mobilising donor funds was still relevant. Consistent with the primary aim of the PCRIP, governments need cash to respond to the emergency needs of disasters. PICs’ annual budget appropriations for contingencies are invariably not enough to cover emergency expenses, even for medium-level disasters. The proposed MIF currently being considered under the DRFI is expected to fill this space in the disaster risk spectrum. It is understood that, under the MIF, countries would be eligible for a fixed pay-out after a declaration of disaster for natural and climatic events. The strategic importance of such cover is significant. It will go a long way to removing the negative perception that the PCRIP is not responsive to the needs of the countries. It will also avoid the current political hazard of countries not receiving a pay-out on the basis of the parametric calibration of the event.

3.11 Attachment and exhaustion points to be clarified

Some countries expressed the view that the attachment point needs to be reviewed, as this determines the country’s eligibility for pay-out after a disaster. They argued that the current attachment point is too high. This, again, may be a sign of the lack of a comprehensive understanding of the inter-relationship between risk coverage, premiums and attachment points. The PCRIP was designed to cover large disasters that may occur only every 10 years or more. As shown in Table 1, above, countries chose a range of attachment events, from 1 in 10 to 1 in 20 years, with some opting for 1 in 15 years. The choice of attachment period determines the attachment points. On exhaustion points, all countries chose a 1-in-150-year exhaustion for tropical cyclones and earthquakes. This underlines the need for a country to prepare a disaster risk financing strategy, which defines the niche role of PCRIP.

3.12 Review of the loss estimation model is warranted

Once the decision to use parametric triggers was made for PCRIP, a calculation agent, AIR Worldwide, was appointed by the WB to build a loss estimation model to reflect the specific characteristics of the PICs. The model is technically complex. It is understood that presentations were made to participating countries on the workings of the model. However, there was a

PCRIP Consultation Report

consistent call in the consultations for the model to be reviewed to better reflect the requirements of PICs. The suggested areas of review included the following:

a. Given Solomon Islands’ experience of the 2014 floods, some countries called for the introduction of rainfall cover in the model. This is being considered by the WB, but this decision-making process will take time and will require extensive data collection. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) offers cover for excessive rainfall. b. The differences between the losses experienced by countries and those estimated by the model were significant in the recent tropical cyclone Pam, affecting Vanuatu. The above ground loss estimated by the model was just above half of the Vanuatu government’s estimate of USD 440 million. Vanuatu stated that it does not understand the reasons for the vast difference. According to Vanuatu officials, the fact that TC Pam did not make direct landfall on Port Vila was inconsequential to the strength of the wind in and around the city. As pointed out by the Review of PCRIP4, The key disadvantage of any parametric-type trigger is basis risk – the risk that the pay-out from the product does not match the actual losses sustained. In this case, the goal of the product was to provide rapid liquidity for some portion of the government’s emergency response costs. Having payments match sustained emergency response costs was important, but not as important as some other factors, namely speed of pay-out and the ability to implement the product in the near term5 (which would not have been feasible for an indemnity-type trigger). The results of the consultations suggest that this point needs to be revisited with participating countries. Tropical cyclone Pam in Vanuatu will be a good case study to use to explain these differences. c. The large deviations between the loss calculated by the model and the Vanuatu government’s estimates may derive from the difference in terminology between the insurance industry and the ‘disaster industry’. In the insurance industry ‘loss’ equates to what the disaster community would call ‘damage’. For example, the loss calculation derived from the model for Vanuatu cannot be directly compared to the total ‘damage’ and ‘loss’ as a result of the cyclone in the government’s estimate; only the ‘damage’ component of that estimate refers to the insurance concept of loss. The calculation of economic loss can be subjective, and is highly dependent on those making the assessment. This is an issue that needs to be clarified with participating countries. d. Countries indicated that the mechanics of the loss estimation model need to be more transparent. Many countries did not understand how the parametric estimation is carried out, even at the conceptual level. While it is understood that the calculation agent will need to safeguard its proprietary information, it will be beneficial for the sustainability of the scheme to revisit the methodologies that the model uses, particularly in its accommodation of regional issues. e. Unlike countries in the Caribbean, PICs are distributed across a vast ocean area. Even if the damage caused by a natural event is severe in an outer island, the cost of transportation of goods and people can be substantial. This is the case in the damage estimated by the model in the earthquake experienced in Santa Cruz in Solomon Islands in 2013, which was below the attachment point. It is understood that such transportation costs are not factored into the loss estimation model. The consultations requested that the model be reviewed to consider transportation costs.

4 Pacific Catastrophe Risk Insurance Pilot; From Design to Implementation, July 2015. 5 Emphasis added.

PCRIP Consultation Report

4. Options for the future of the PCRIP at the end of the third season

The consultations discussed the options for the PCRIP when the third pilot season concludes, at the end of October 2015.

Option 1: Terminate the PCRIP: This option was not supported by any country. While lessons have been learned over the last three years, which need to be addressed in further seasons of the program, the countries unanimously supported the continuation of the PCRIP.

Option 2: Continue with the pilot program for another year: There was significant support for the pilot program to be extended for another year to properly bed down some of the issues that have emerged in the last three years, including ownership, coverage, subsidy and estimated loss. Countries supporting this option considered that it was essential to resolve these issues before the ongoing structure of the scheme is determined. The findings of this consultation could be used to identify areas for review. An extension of the pilot program would also allow other interested countries, such as Fiji, to join the scheme.

Option 3: Establish the scheme as a permanent facility: Half of the respondents in the consultation indicated that the pilot period of three years is long enough, and it is time to transition to a permanent arrangement. The need for the scheme has been clearly identified, and the PCRIP should become a permanent feature of disaster risk management in the region. These countries pointed out that, while issues are still emerging, these can be resolved under a permanent arrangement. Extending the pilot to its fourth season would send the wrong signal that countries are yet to commit to the program. Transitioning the program to a permanent basis may also help to attract potential donors and facilitate the institutionalisation of disaster risk management in the Pacific region.

The distribution of the expressed preferences for the three options is represented in Table 2, below.

Table 2: Distribution of respondents’ support for options for the future of PCRIP Option Support (% of respondents) Option 1: Terminate PCRIP 0 Option 2: Extend pilot program 40 Option 3: Establish PRIP as a permanent facility 50 Indifferent 10

5. Risks to sustainability

Countries stated that the arrangements necessary to safeguard the sustainability of the insurance scheme need to be firmly embedded in the program. The greatest risk to the sustainability of the insurance scheme is of countries withdrawing from the facility. While there are a variety of reasons that a country may withdraw, the most likely reason is if countries do not receive pay-outs after several disasters, as was the case with Solomon Islands. This can create political opposition to the country’s participation in the scheme, when it has been paying

PCRIP Consultation Report

premiums but receives no pay-out when the country suffers from a disaster because of an exclusionary criterion. The consultations highlighted the political risk posed for the continuation of a country’s participation, when any disaster is not of sufficient magnitude to trigger a pay-out. Perversely, this situation can lead to expectations of a disaster so that the country receives a ‘return’ on the insurance premium. In this scenario, countries may question the effectiveness of the premium expenditure in light of the many priorities that governments have for economic development. The establishment of a mechanism that covers lower-level disasters would mitigate this risk.

In general, the awareness of climate change and disaster risk transfer in the region is improving. In some countries, the level of awareness amongst politicians is high. But in other countries a lot of work still needs to be done to sensitise politicians to the need to manage the risks from natural disasters through risk insurance.

The affordability of the premium is another possible reason for withdrawal. A permanent subsidy arrangement will greatly minimise risks of withdrawal.

6. Views on the proposed financial products of the DRFI

Season 3 of PCRIP is a component of the wider DRFI. The aim of the DRFI is to assist countries to safeguard the country’s financial position in times of natural disaster. In addition to the PCRIP, other financial products are still being discussed and developed by the WB and its partners.

6.1 Support for a mutual insurance fund

Another product under development is a mutual insurance fund. The details of the mechanism of the MIF are still being developed, but its main attraction is that the amount of pay-out increases in subsequent years if no claim is made. The countries expressed unanimous support for the MIF, particularly if it is aimed at the medium to lower end of the disaster spectrum. As discussed in section 3.10, the strategic importance of such a mechanism is very high. However, concern was expressed that this added flexibility may necessitate higher premiums, which many countries may not be able to afford. This observation may be premature, as details of the MIF are still being developed. It is understood that consultations will be held when the design of the MIF is completed.

6.2 Search for a cost-effective mechanism

While the MIF is a step in the right direction, there was unanimous support for a more cost- effective mechanism to be developed for catastrophe insurance. The choice of the parametric catastrophe insurance mechanism under the DRFI was made with considerable research and analysis. As discussed above, the benefit of this approach is the speed of availability of funds to the affected countries – within two weeks of the event. That said, the model also has significant limitations, the most serious being the substantial differences between governments’ estimates of loss and the loss estimated by the loss assessment model, in the event of a disaster.

PCRIP Consultation Report

The WB, with its partners, is developing new financial products that might address these concerns. Some countries made references to the Caribbean model as a possible mechanism to adopt. Countries have strongly called for the establishment of a regional self-insurance fund to be explored to replace or supplement the current parametric insurance. A wide range of issues will need to be studied in relation to self-insurance, and countries have asked that these be analysed as expeditiously as possible.

6.3 Support for capacity building under the DRFI

The provision of technical assistance to build capacity in the public financial management of natural disasters is the second component of the DRFI to the PCRIP. This initiative was well supported by countries. The TA has assisted governments to prepare risk management planning, update legislation and establish pre-disaster financial procedures. The TA has also included the preparation of post-disaster budget execution guidelines to assist governments to better manage their financial responses to natural disasters. The preparation of the guidelines was fully supported by countries, as it would help them to respond more quickly to disasters without compromising the accountability for and control of expenses. Procurement is, perhaps, the most risky area of public finance under normal circumstances. It becomes an even more difficult challenge after a disaster, when goods are needed to be procured immediately, without sacrificing the accountability required under the financial regulations. Normal procurement processes may be varied or set aside during disasters, which elevates the risk of corruption. One solution to this risk is the pre-qualification of bids for the procurement of articles that are normally required after a cyclone or other disaster. This and other recommendations for improving post-disaster finance responses are included in the guidelines.

7. The structure of the management entity for the PCRIP

At the request of PICs that attended the International Monetary Fund/WB annual meetings in 2011, the WB has been the intermediator of the PCRIP between countries and the reinsurers since the scheme commenced three years ago. The WB also intermediates between other third parties, such as the calculation agent that the WB appointed and the escrow agent6 appointed through the calculation agent. This highly technical role of mediator is essential for the establishment and operation of the scheme. The WB has the skills and experience, and, importantly, the international reputation to effectively undertake these tasks on behalf of the countries. From the outset of the pilot program, the WB was tasked with establishing the scheme, building the database, drafting legislation and providing critical technical advice to PICs about the PCRIP. As the third pilot season of the scheme nears completion, it is timely that the participating countries discuss and recommend the nature, form and structure of the management entity that is to continue these and other related functions.

6 The escrow agent is the custodian of the loss estimation model, and ensures that the calculations of loss are undertaken objectively, immediately after the event.

PCRIP Consultation Report

The main aim of the consultation was, therefore, to discuss the options for establishing a separate management entity that could take over the intermediary role currently performed by the WB. The functions that are currently undertaken by the WB include:

. attracting donor finance; . developing financing agreements for the countries; . producing country packages to help countries choose their level of coverage (cover letter, explanatory presentation, country excel tools, selection of coverage letters and hedge requests); . placing the catastrophe risk pool on the market upon receipt of finance and a hedge request; . negotiating with reinsurers and the modelling agency; . sending legal paperwork to PICS; and . sending an effective coverage letter outlining the policy details.

The WB drafted the long-form confirmations with insurers and the agreements with third parties. The intermediation role of WB required it to mitigate the credit risk from any party to the agreement through diversifying the insurance portfolio, selecting reputable insurers and arranging for premiums to be paid in arrears. As the intermediator, the WB does not retain any risks, transferring all risks to the market.

These tasks are comprehensive, and require a set of technical skills that are difficult to find in the Pacific region and are expensive to acquire in the global market. In addition to these tasks, the WB fulfilled essential educational, training, reporting and coordination roles with PICs. The WB has therefore played an essential part in bringing the PCRIP to where it is today. Countries expressed their appreciation to the WB for its immense contribution to the scheme. In addition to these roles, the management entity will be expected to develop new financial products and to work with non-participating PICs to increase the insurance pool. 7.1 In-principle support for the separate management entity, but roles to be clearly defined

There was consensus, in principle, to the establishment of a separate entity to govern the operation and administration of the catastrophe insurance scheme. The PCRIP can learn from the structure of the CCRIF, which was established as a segregated portfolio company. Unlike the role of the WB in the PCRIP, the CCRIF is established as an insurer, and retains a small proportion of risks. The roles assigned to the management entity will need to be clearly defined, and they will be critical in determining the structure of the entity.

7.2 Costs of management entity must be shared

The WB has undertaken the intermediation role without imposing the costs of that service on participating countries. Discussion in the consultations centred on the additional costs that will be incurred by PICs of running a separate management entity. Countries emphasised that the most cost-effective model should be found in order to minimise the overhead costs of the management entity that would be passed onto countries. Acquiring the necessary skills within PICs to run a management entity would be expensive. In addition, there will be additional costs of maintaining a new governance structure and for operating processes, and in purchasing

PCRIP Consultation Report

equipment for the management entity. The overriding concern of countries was the already overwhelming demands on their scarce revenues, meaning that their budgets may not be able to absorb substantial additional costs.

Most countries expressed their commitment to contributing to some of the costs of the management entity. Reflecting the same principle underpinning contributing to a proportion of the premiums in the PCRIP, these countries emphasised the need for PICs to demonstrate commitment to the program by contributing to the cost of the entity. However, some countries pointed out that they will not be in a position to bear any of these costs. These countries indicated that they would prefer the resources to be used to pay for additional cover, which would add directly to the benefits provided by the scheme.

It was therefore clear from the consultations that PICs considered that the cost of the management entity must be shared with other financial sources. The most obvious of these sources is development partners, and discussions should be initiated to assess this possibility. Another option is to explore the possibility of global climate change funds providing resources.

The view was also expressed that the amount of funds that will be used for the operation of the management entity could be better used to further subsidise the premiums. While this is a valid argument, it would require the WB or another agency to continue to provide this service at no cost to PICs. Some countries commented that they are indirectly paying for the WB’s involvement through their annual contribution to the organisation. While this argument may be valid at the country level, it may be difficult to pursue at the global level. 7.3 Link the decision on the management entity to the pilot program

Countries are expected to determine the future of the PCRIP at the Pacific Islands Forum Economic Ministers Meeting in October 2015. The options that could be considered are explored in detail in section 4, which include the termination of the scheme, extension of the pilot program for another year, and making the scheme permanent. Some countries suggested that the separation of the management of the scheme from the WB should be synchronised with the option that will be adopted by the FEMM in October. If the FEMM decides to extend the pilot scheme, these countries recommend that the WB continues to guide the scheme until it becomes permanent. This would allow the WB to address the remaining concerns that countries may have in relation to other aspects of the scheme. These countries considered that, while the discussion of the establishment of a management entity should start, it was premature that it be established before the decision is taken for the scheme to become permanent.

7.4 World Bank to continue to intermediate the scheme

Some countries indicated that the involvement of a reputable international organisation, such as the WB, in the management of the PCRIP has a favourable impact on the premiums and the facility overall. The WB is well-recognised in the global arena. This may not be the case if the intermediation is undertaken by a regional organisation. The best option, they argue, would be to ask the WB to continue to intermediate between countries and insurers until the scheme is fully established and is able to stand on its own. The timing of the withdrawal of the WB from the scheme is important for its sustainability and recognition in the global insurance market. The sustainability of the scheme is critical, and it has not yet become fully established. Therefore,

PCRIP Consultation Report these countries argued that it is too early for the WB to transfer the management of the scheme to another entity. The transition should be planned well in advance to allow a smooth transition. The other advantage of this option is that it will not impose additional costs to PICs at this stage. The uncertainty around this option is the WB’s position on this issue.

7.5 Options for the structure of the management entity

Option 1: Establish the management entity as a stand-alone entity

Some countries argued that the independence of the management of the scheme will be enhanced if the entity is established as a separate, stand-alone entity. The functions of the management entity may necessitate that it be established as a corporate entity, as is the case of the CCRIF. A stand-alone entity should more easily be able to avoid political influence, and this structure will more easily allow for the consideration of regional issues. It may also lead to greater efficiency, which would be required of it to effectively fulfil its role. The major disadvantage of the stand-alone entity structure is the additional overhead costs that will be incurred in setting up its own governance and operational systems.

Option 2: Attach the management entity to an existing regional organisation

Some countries prefer that the management entity be attached to an existing regional body, such as PIF or SPC. The major advantage of this structure is that it would greatly reduce overhead costs. It is possible that the entity in this form might be funded from the donor assistance to the regional organisation. The major disadvantage of this option is that it may compromise the independence of the entity from political and donor influence. It may also be subject to the bureaucracy of the existing organisation, which may seriously affect its efficiency in its dealing with pay-outs and other administrative procedures.

Option 3: Outsource the management of the scheme

Some countries suggested that the management of the scheme could be outsourced. The feasibility and cost of this option would need to be evaluated.

7.6 Full feasibility study to be undertaken

A unanimous view was expressed in support of carrying out a full feasibility study to help identify the most cost-effective option for establishing a management entity.

PCRIP Consultation Report

Annex 1: List of people met with during consultations

Cook Islands Richard Neves Finance Secretary, Ministry of Finance and Economic Management (MFEM) Elizabeth Kodeka Chief of Staff, Office of the Prime Minister (OPM) Lavinia Tama Budget Director, MFEM William Tuivaga SRIC Manager, CCCI, OPM Mia Teaurima SRIC, Manger focal point, CCCI Otheniel Tangianau Director, Pa Enua Governance, OPM Lydia Sijp Project Coordinator, Emergency Management Cook Islands, OPM Elizabeth Hosking Planning and Advisory Officer, Emergency Management Cook Islands, OPM Petero Okotai Director, Central Policy and Planning Office, OPM Dr. Teina Rongo Climate Change Advisor, OPM Ana Tiraa Director, Climate Change Cook Islands (CCCI), OPM Fiji David Kolitagane Deputy Permanent Secretary for Finance Administration, Ministry of Finance (MOF) Tuimasi Ulu Senior Analyst, Budget, MOF Peter Emberson, Director, Climate Change Waisea Vosa Climate Change Project Officer Manasa Katonivualiku Project Coordinator, Climate Change Aminiasi Department of the Environment Samoa Iulai Lavea CEO, Ministry of Finance Gilbert Wongsin Head of Financial Supervision, Central Bank of Samoa (CBS) Iloauila Aumua Aid Division, Ministry of Finance (MOF). Ms Litara Taulealo Acting CEO, Climate Resilience Investment Coordination Unit, Ministry of Finance Ms Filomena Nelson Acting CEO, Disaster Management Office, Ministry of Natural Resources and Environment Solomon Islands Shadrach Fanega Permanent Secretary for Ministry of Development Planning and Aid Coordination (MDPAC) Harry Kuma Permanent Secretary for Finance, Ministry of Finance and Treasury (MOFT) Denton Rarawa Governor, Central Bank of Solomon Islands (CBSI) Mckini Dentana Under Secretary, Policy and Economic, MOFT Paula Uluinaceva Accountant General, MOFT Taiatu Ata’ata Country Development Coordinator, Asian Development Bank (ADB) Eric Johnson World Bank, Honiara Office

PCRIP Consultation Report

Tonga Tatafu Moeaki CEO Ministry of Finance and National Planning (MOFNP) Natalia Latu Deputy Secretary Policy Reform, MOFNP Makeleta Siliva Acting Deputy Secretary, Treasury Saia Faletau Country Development Coordinator, ADB and WB Vanuatu Peter Forau Director General. Melanesian Spearhead Group (MSG) Secretariat. Letlet August Director, Treasury, Ministry of Finance and Economic Development (MFEM) Nigel Malosu Manager, Budget, MFEM Shadrack Welegtabit Director, National Disaster Management Office (NDMO) World Bank (WB) Samantha Cook Disaster Risk Financing and Insurance Specialist, Disaster Risk Financing and Insurance program, GFMDR and GFDRR Secretariat of the Pacific Community (SPC) Paula Holland Acting Deputy Director, Disaster Reduction Programme David Abbot Public Financial Management Specialist, PCRAFI Norense Iyahen Risk Advisor and Coordinator, PCRAFI

PCRIP Consultation Report

Annex 2: Bibliography

1. Air Worldwide 2015, Tropical Cyclone Pam (17P) Event Briefing – Countries Affected: Vanuatu, 14 April. 2. World Bank 2015, Pacific Catastrophe Risk Insurance Pilot: From Design to Implementation – Some Lessons Learned, Available online at: https://www.gfdrr.org/pcrafi-pilot-design-implementation. 3. World Bank 2015, Country Note: Samoa - Disaster Risk Financing and Insurance, available online at: https://www.gfdrr.org/sites/default/files/publication/Country-Note- Samoa.pdf. 4. World Bank 2015, Country Note: The Cook Islands - Disaster Risk Financing and Insurance, available online at: https://www.gfdrr.org/sites/default/files/publication/Country- Note-Cook-Islands.pdf. 5. World Bank 2015, Country Note: Tonga - Disaster Risk Financing and Insurance, available online at: https://www.gfdrr.org/sites/default/files/publication/Country-Note- Tonga.pdf. 6. World Bank 2015, Country Note: Vanuatu – Disaster Risk Financing and Insurance, available online at: https://www.gfdrr.org/sites/default/files/publication/Country-Note- Vanuatu.pdf 7. World Bank 2014, The Pacific Disaster Risk Financing and Insurance, available online at: https://www.gfdrr.org/sites/default/files/publication/PCRAFI_Program%20Pager_FINAL%2 0VERSION.pdf. 8. World Bank 2014, The Pacific Disaster Risk Financing and Insurance Program – briefing note.