2014•01•31 St Lucia
Policy holders of the Livelihood Protection Policy (LPP) in St. Lucia, Caribbean, received their first ever insurance payouts this month, following a tropical storm that hit the region during the holiday season.
The LPP is a parametric weather-index-based insurance solution specifically targeted at low-income communities in weather vulnerable countries like St. Lucia. Unlike traditional insurance options, insurance payouts are not based on actual damages, but on when rainfall or wind speeds exceed a certain threshold. This means that affected policy holders get payouts faster, since there is no damage assessment, allowing them to rebuild and recover faster more quickly from the impact of a disaster.
LPP holders also receive early warning SMS, which alert them to upcoming extreme weather events and provide them with information on how help to minimize weather losses.
Families, who are covered by LPP praised the promptness of the payout and protection it offered them. Mr. Walter Edwin, a policy holder, stated, “I think it is very important to have some form of insurance as a honey producer, given the current climatic conditions we face. During the trough we experienced a high level of rainfall. I received the SMS notification of the trigger and the payment was received in the time promised.”
The Caribbean region is susceptible to a number of natural disasters including droughts, floods and hurricanes, which are increasing in frequency and intensity as a result of climate change. These disasters severely impair economic growth in the Caribbean because of its reliance on climate vulnerable sectors such as tourism and agriculture. Most low-income people in the Caribbean work in these sectors but have so far not been able to access risk transfer instruments (such as insurance). In the face of an extreme weather event, they are mostly left to rely on government assistance, deplete their own savings or, even most damaging, do nothing. Recurring weather extremes put these parts of the population at risk of losing their livelihoods and leading them further into poverty in the long-run.
In response to the need for climate risk insurance in the region, the Munich Climate Insurance Initiative (MCII), hosted at UNU-EHS, initiated the Climate Risk Adaptation and Insurance in the Caribbean project, which developed the LPP concept. To date, the LPP has been launched in the project’s target countries of Jamaica, Saint Lucia and Grenada.