The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) REPORT NO.: RES49766 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SECOND CENTRAL AMERICA AND CARIBBEAN CATASTROPHE RISK INSURANCE PROJECT APPROVED ON JUNE 25, 2021 TO CARIBBEAN CATASTROPHE RISK INSURANCE FACILITY – SEGREGATED PORTFOLIO COMPANY (CCRIF SPC) URBAN, RESILIENCE AND LAND GLOBAL PRACTICE LATIN AMERICA AND CARIBBEAN REGION Regional Vice President: Carlos Felipe Jaramillo Country Director: Michel Kerf Regional Director: Anna Wellenstein Practice Manager/Manager: David N. Sislen Task Team Leader(s): Abigail C. Baca, Mirtha Liliana Escobar Saenz The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) ABBREVIATIONS AND ACRONYMS CARICOM Caribbean Community CCRIF SPC Caribbean Catastrophe Risk Insurance Facility – Segregated Portfolio Company COSEFIN Council of Ministers of Finance of Central America, Panama, and the Dominican Republic DFPTF Trust Funds and Partnerships Department EDD End Disbursement Date ESCP Environmental and Social Commitment Plan ESS Environmental and Social Standard GFDRR Global Facility for Disaster Reduction and Recovery LMP Labor Management Procedures MDTF Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund OCT Overseas Countries and Territories PDO Project Development Objective SEP Stakeholder Engagement Plan The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) BASIC DATA Product Information Project ID Financing Instrument P175616 Investment Project Financing Environmental and Social Risk Classification (ESRC) Low Approval Date Current Closing Date 25-Jun-2021 30-Jun-2022 Organizations Borrower Responsible Agency Caribbean Catastrophe Risk Insurance Facility – Caribbean Catastrophe Risk Insurance Facility – Segregated Portfolio Company (CCRIF SPC) Segregated Portfolio Company (CCRIF SPC) Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to improve the affordability of high-quality sovereign catastrophe risk transfer associated with earthquakes and climate-related events for CCRIF SPC participating countries. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-B6010 02-Jul-2021 08-Jul-2021 24-Sep-2021 30-Jun-2022 .31 0 .31 TF-B6011 02-Jul-2021 08-Jul-2021 24-Sep-2021 31-Dec-2021 11.00 0 11.00 TF-B6121 02-Jul-2021 08-Jul-2021 24-Sep-2021 30-Jun-2022 11.66 11.48 .17 The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING BACKGROUND 1. The Second CCRIF SPC project was approved by the Bank on June 25, 2021, for US$ 23.24 million1 financed by three recipient-executed grants to the Caribbean Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC) and was declared effective on September 24, 2021, with a closing date of June 30, 2022. 2. The project is financed by a US$11 million grant (TF0B6011) made available through the Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund (MDTF) together with a EUR 10 million grant (TF0B6121) from the European Union’s Caribbean Regional Resilience Building Facility and a EUR 261,800 grant (TF0B6010) from the Global Facility for Disaster Reduction and Recovery (GFDRR) Technical Assistance (TA) Program for the Caribbean Overseas Countries and Territories (OCT). 3. The project was preceded by the Central America & Caribbean Catastrophe Risk Insurance Project (P149670), approved by the LCRVP on June 30, 2015, also financed by from the World Bank-administered MDTF in the amount of US$43.25 million. The first project is set to close on December 31, 2021 and is expected to reach 100% disbursement with a rating of Satisfactory. 4. The MDTF currently channels resources from the European Union (EUR 14 million or US$ 14.8 million), Canada (CAD 16.5 million or US$ 13.8 million), the United States (US$ 10 million) and the Federal Republic of Germany represented through the BMZ (EUR 22 million or US$ 23.8 million) and its Development Bank (KfW) (EUR 15 million or US$ 16.9 million) for a total of US$79.3 million in contributions. This partnership builds on regional coordination between the CCRIF SPC, the Caribbean Community (CARICOM), and the Council of Ministers of Finance of Central America, Panama, and the Dominican Republic (COSEFIN) to strengthen their sustainable development agenda and mitigating the fiscal vulnerability by improving access to disaster risk financing instruments and foster political dialogue on disaster risk management. The current end disbursement date (EDD) of the MDTF is June 30, 2022. PROJECT STATUS 5. The Project Development Objective (PDO) of the Second CCRIF SPC project is to improve the affordability of high- quality sovereign catastrophe risk transfer associated with earthquakes and climate-related events for the CCRIF SPC participating countries. The project includes three components: (i) Component 1: Parametric Geophysical risk insurance for COSEFIN Participating Countries (US$1.50 million); (ii) Component 2: Parametric Climate Risk Insurance for COSEFIN 1 As two of the three grants are denominated in euro, the total US dollar amount for the project is subject to change due to exchange rate fluctuations. The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) Participating Countries (US$9.50 million); and (iii) Component 3: Parametric Climate Risk Insurance for CARICOM Participating Countries and selected OCTs (US$12.24 million). 6. Progress towards achievement of the PDO and Implementation Progress in the last Implementation Status and Results Report dated October 5, 2021, are both Satisfactory. Progress under each component is rated Satisfactory. El Salvador and Honduras have joined the CCRIF SPC (El Salvador signed Participation Agreement in June 2021, Honduras – in September 2021, as of December 2021, they are still finalizing their purchase of CCRIF SPC policies) increasing the total number of members to 24 - five Central American countries (El Salvador, Honduras, Nicaragua, Panama, and Guatemala) and 19 Caribbean countries. The steady increase in country participation indicates that the CCRIF SPC is a mechanism that works, helping countries at their most vulnerable period, and continuing to offer new products to meet countries’ demands for innovation to reduce disaster and climate risks. 7. As of December 15, 2021, US$11.48 million (49 percent) of total grant amount have been disbursed, consistent with the number of insurance policies purchased by member countries and accounts for expenditures related to reinsurance costs. In addition to reinsurance costs, the grants support participation fees, insurance payouts, and technical assistance. The financing of insurance payouts falls outside the project’s control as disbursement can only be made when an event is triggered. 8. Financial management and procurement are rated satisfactory. 9. The Environmental and Social Standard (ESS) performance of the Project is Satisfactory. The project has developed and disclosed the Environmental and Social Commitment Plan (ESCP). Consistent with paragraph 13, footnote 3 of ESS10, elements of the Stakeholder Engagement are included as part of the ESCP, and preparation of a stand-alone Stakeholder Engagement Plan (SEP) was not necessary. RATIONALE FOR RESTRUCTURING 10. The grant is financed by a MDTF that channels resources from various donors and has an End Disbursement Date (EDD) of June 30, 2022. The MDTF’s EDD will be extended to December 31, 2024 to allow for sufficient time to allocate and additional contribution of EUR 10 million received from Germany in November 2021. The EDD would allow the grant to be extended to June 30, 2024. While the extension is well advanced, some donors are not yet accepting electronic signature of legal documents, so it is likely that the extension will be finalized in January 2022. 11. The current request for the extension of the closing date of the TF0B6011 from December 31, 2021 until February 28, 2022 will ensure that the activities financed by the grant can be implemented without interruption while the end disbursement date (EDD) of the MDTF is being extended. The new EDD will be December 31, 2024, which would enable the grant to be further extended to June 30, 2024 and to process the additional funding for the project. 12. Through the MDTF, donor support of the CCRIF SPC has been essential in ensuring its financial viability and long- term sustainability. In addition to financing operating expenditures, donor funds have allowed the facility to retain some of the risk ceded by participating countries and access the reinsurance market. By supporting the CCRIF SPC’s capitalization, donors’ efforts have extended the impact and benefits of their funding beyond the duration of the initiative. Based on recent discussions with donors, their interest and commitment to the initiative remains strong and aligned with regional and country priorities to strengthen their fiscal resilience. 13. For member countries, the CCRIF SPC has been instrumental in helping them reduce the negative impacts of natural hazards where losses and damages associated with these hazards are compounded by the impacts of COVID-19. During policy years 2020/21 and 2021/22, the CCRIF SPC provided premium discounts worth up to 26 percent (cumulative for 2020 – 22) for Caribbean countries and up to 50 percent for Central American countries. Countries have used the The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) discounts to reduce their premium or increase coverage, depending on each member country’s needs. In addition, through technical assistance activities, the World Bank continues supporting countries to reassess their financial needs and to provide tools that help decision making. II. DESCRIPTION OF PROPOSED CHANGES 14. The closing date of TF0B6011 is proposed to be extended from December 31, 2021 to February 28, 2022. The Disbursement Deadline specified in the Disbursement Letter dated July 2, 2021 would also be amended to be two months after this date, effectively April 28, 2022. The extension of the MDTF’s EDD would enable the grant to be extended up to June 30, 2024 in a subsequent restructuring. ES NOTE TABLE III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Legal Covenants ✔ The World Bank Second Central America and Caribbean Catastrophe Risk Insurance Project (P175616) Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-B6010 Effective 30-Jun-2022 30-Jun-2022 28-Oct-2022 TF-B6011 Effective 31-Dec-2021 28-Feb-2022 28-Apr-2022 TF-B6121 Effective 30-Jun-2022 30-Jun-2022 28-Oct-2022 .