94980
COOK
ISLANDS
Country Note
PCR AFI 2015
THE COOK ISLANDS
February 2015
Disaster Risk Financing and Insurance
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THE COOK ISLANDS PCRAFI i
Table of Contents
01 Acknowledgments
02 Acronyms and Abbreviations
03 Executive Summary
04 Introduction
06 Economic Impact of Natural Disasters
09 Public Financial Management of Natural Disasters
10 Post-Disaster Budget Mobilization
16 Post-Disaster Budget Execution
18 Domestic Catastrophe Risk Insurance Market
20 Options for Consideration
21 End Notes
22 References
23 About PCRAFI
24 Annex 1
31 Annex 2
ii PCRAFI THE COOK ISLANDS
Table of Contents
32 Annex 3
32 Executive Summary
33 Introduction
37 Regulatory Framework
39 Insurance of Public Assets
40 Past Catastrophe Events
41 Options for Consideration
41 Endnotes
41 References
43 Annex 4
THE COOK ISLANDS PCRAFI 01
Acknowledgments
This note has been prepared by a team led (SPC) through its Applied Geoscience and
by Olivier Mahul (Disaster Risk Financing and Technology Division (SOPAC), the World Bank,
Insurance Program Manager, World Bank) and and the Asian Development Bank, with financial
comprising Samantha Cook (Financial Sector support from the government of Japan and the
Specialist) and Barry Bailey (Consultant). Global Facility for Disaster Reduction and Recovery
(GFDRR).
The team gratefully acknowledges the data,
information, and other invaluable contributions The Disaster Risk Financing and Insurance Program
made by the Pacific Island Countries. Without their is grateful for the financial support received from
skills and expertise, the compilation of this note the government of Japan and the Global Facility
would not have been possible. for Disaster Reduction and Recovery.
This note benefitted greatly from the technical
expertise of the following persons: Franz Drees-
Gross (Country Director Timore-Leste, Papua New
Guinea. and Pacific Islands, World Bank), Olivier
Mahul (Disaster Risk Financing and Insurance
Program Manager, World Bank), Denis Jordy (Senior
Environmental Specialist, World Bank), Michael
Bonte-Grapentin (Senior Disaster Risk Management
Specialist, World Bank), Paula Holland (Secretariat
of the Pacific Community), and David Abbott
(Secretariat of the Pacific Community).
Inputs and reviews from Robert Utz, David
Knight, Kim Edwards, Oscar Ishizawa, Rashmin
Gunasekera, Keren Charles, Francesca de Nicola
and Susann Tischendorf greatly enhanced the final
note. Design and layout developed by Bivee.co.
Section
The Pacific Catastrophe Risk Assessment and
Financing Initiative (PCRAFI) is a joint initiative
between the Secretariat of the Pacific Community
A
02 PCRAFI THE COOK ISLANDS
Acronyms
and Abbreviations
ACRRP Aitutaki Cyclone Recovery and Reconstruction Plan
CIIC Cook Islands Investment Corporation
DRFI Disaster risk financing and insurance
EMC Emergency Management Cook Islands
ERTF Emergency Response Trust Fund
FSC Financial Supervisory Commission
GDP Gross domestic product
GFS Government Finance Statistics
HFA Hyogo Framework for Action
IAIS International Association of Insurance Supervisors
IMF International Monetary Fund
ISR Industrial Special Risks
JNAP Joint National Action Plan
LRF Loan Repayment Fund
MDBI Material Damage/Business Interruption
MFEM Ministry of Finance and Economic Management
MOIP Ministry of Infrastructure and Planning
NAP National Action Plan
PCRAFI Pacific Catastrophe Risk Assessment and Financing Initiative
PIC Pacific Island Country
RFA Regional Framework for Action
SMEs Small and medium enterprises
SOPAC Applied Geoscience and Technology Division of SPC
SPC Secretariat of the Pacific Community
SOE State-owned enterprise
TC Tropical Cyclone
Section
UNDP United Nations Development Programme
UNISDR United Nations International Strategy for Disaster Risk Reduction
A Currency: New Zealand dollar (NZ$)
Average exchange rate: US$1 = NZ$1.22
THE COOK ISLANDS PCRAFI 03
Executive Summary
The Cook Islands is composed of 15 islands,
/// The Cook Islands has a proactive approach to
///
spread across nearly 2 million km2 of disaster risk financing and insurance (DRFI),
territorial waters. The geographic spread of the
///
which is supported by the upper echelons of
Cook Islands poses logistical problems for any government. In January 2011, the prime minister
///
necessary post-disaster relief and response efforts. in his role as chair of the National Disaster Risk
The 2011 census estimated the resident population Management Council requested that the Ministry
of the Cook Islands at approximately 14,974 of Finance and Economic Management look
people, with a further 2,820 temporary residents. at ways to become self-reliant in initial disaster
Approximately three-quarters of the population response and generate new income streams
lived in Rarotonga. The geographic spread of for investment in a fund specifically for disaster
the population makes initial disaster response to management response and recovery.
the outer islands expensive and further burdens
The Cook Islands has available a maximum
already-constrained public finances.
///
amount of NZ$5.6 million (US$4.6 million)—
The events of 2005 demonstrated that the in the form of contingency funds and
catastrophe risk insurance—to facilitate
///
Cook Islands is extremely vulnerable to the
disaster response. This amount is equivalent to
threat of tropical cyclones (TCs): in the two
///
4 percent of gross total appropriations and 1.7
///
months of February and March 2005, TCs Meena,
percent of gross domestic product in 2011. The
Nancy, Olaf, Percy, and Rae swept the country.
probability in any year that disaster losses could
Four of these cyclones reached the maximum
exceed these contingency funds is estimated at
category 5 rating and caused severe damage to
4.9 percent. The government has dedicated, yet
infrastructure and agriculture (Cyclone Recovery
limited, funds that can be accessed following an
Committee 2006).
event.
The Cook Islands is expected to incur, on
A number of options for further improving
///
average, about NZ$6 million (US$4.9 million)
///
the Cook Islands’ financial protection against
per year in losses due to tropical cyclones. ///
disasters are presented for consideration:
In the next 50 years, the Cook Islands has a 50
///
percent chance of experiencing a per-event loss (a) The development of an integrated DRFI
exceeding NZ$97 million (US$79.5 million), and strategy;
a 10 percent chance of experiencing a per-event
loss exceeding NZ$327 million (US$268 million) (b) Investigation of using contingent credit to
from tropical cyclones. Tropical cyclones are the access additional liquidity post-disaster;
predominant peril impacting the Cook Islands;
(c) Development of an operations manual
Pacific Catastrophe Risk Assessment and Financing
for post-disaster budget mobilization and Section
Initiative (PCRAFI) catastrophe models indicate execution; and
negligible losses from earthquake and tsunami.
(d) The identification of assets to be included in
an insurance program for critical public assets.
A
04 PCRAFI THE COOK ISLANDS
Introduction
The Cook Islands is composed of 15 islands,
/// Development Programme (UNDP) Pacific Centre,
spread across nearly 2 million km2 of the United Nations International Strategy for
territorial waters. The geographic spread of the
///
Disaster Risk Reduction (UNISDR), and other
Cook Islands poses logistical problems for any partners, has developed several institutional
necessary post-disaster relief and response efforts. frameworks on disaster risk management and
The 2011 census estimated the resident population climate change adaptation at the national,
of the Cook Islands at approximately 14,974 subregional, and international level, including
people, with a further 2,820 temporary residents. the following:
Approximately three-quarters of the population
lived in Rarotonga. The resident population • Hyogo Framework for Action (HFA) 2005–
has been in a slow but generally steady decline 2015
since 1965 as a result of outward migration. The
• Pacific Disaster Risk Reduction and Disaster
government views outward migration as a major
threat to sustainable development. A steady Management Framework for Action (Regional
increase in the number of migrant workers, Framework for Action, or RFA) 2005–2015
primarily in the tourism industry, has acted as a
• National Action Plan (NAP) for Disaster Risk
counter to out-migration.
Management, 2009–2015
Events of early 2005 demonstrated that the
• Joint National Action Plan (JNAP) for Disaster
///
Cook Islands is extremely vulnerable to the
Risk Management and Climate Change
threat of tropical cyclones (TCs): in the two
Adaptation, 2011–2015
///
months of February and March 2005, TCs Meena,
Nancy, Olaf, Percy, and Rae swept the country. The JNAP cites the creation of sustainable
///
Four of these cyclones reached the maximum national financing mechanisms for disaster
category 5 rating and caused severe damage to risk management and climate change
infrastructure and agriculture (Cyclone Recovery
adaptation as a priority for action (Government
///
Committee 2006).
of Cook Islands 2011). This goal has been
The government of Cook Islands, in conjunction carried forward from the NAP, and a great deal
with the Secretariat of the Pacific Community of progress has been made in the Cook Islands
Section
Applied Geoscience Division (SPC-SOPAC), the toward establishing sustainable sources of finance
Secretariat of the Pacific Regional Environment for these areas, including establishment of the
01 Programme (SPREP), the United Nations Emergency Response Trust Fund (ERTF) in 2011.
THE COOK ISLANDS PCRAFI 05
Disaster risk financing and insurance (DRFI) is
/// The Pacific Disaster Risk Financing and Insurance
a key activity of the HFA Priorities for Action (DRFI) Program enables countries to increase their
4 and 5. 1 The HFA is a result-based plan of action financial resilience against natural disasters by
improving their capacity to meet post-disaster
///
adopted by 168 countries to reduce disaster risk
funding needs without compromising their fiscal
and vulnerability to natural hazards and to increase balance. This program is one application of the
the resilience of nations and communities to Pacific Catastrophe Risk Assessment and Financing
disasters over the period 2005–2015. In the Pacific, Initiative (PCRAFI). The Pacific DRFI program is
the HFA formed the basis for the development of built upon a three-tiered approach to disaster risk
the Pacific Disaster Risk Reduction and Disaster financing. These layers align to the basic principles
of sound public financial management, such as the
Management Framework for Action (Regional
efficient allocation of resources, access to sufficient
Framework for Action, or RFA). resources, and macroeconomic stabilization. The
three tiers acknowledge the different financial
The Regional Framework for Action cites
requirements associated with different levels of
///
DRFI activities as a key national and regional risk:
activity. Theme 4—“Planning for effective
///
preparedness, response and recovery”—has (a) Self-retention, such as a contingency budget
an associated key national activity, “Establish a and national reserves, to finance small but
national disaster fund for response and recovery.” recurrent disasters;
Theme 6 of the RFA—“Reduction of underlying
(b) A contingent credit mechanism for less
risk factors”—cites the development of “financial
frequent but more severe events; and
risk-sharing mechanisms, particularly insurance,
re-insurance and other financial modalities (c) Disaster risk transfer (such as insurance) to
against disasters” as both a key national and cover major natural disasters. See figure 1.
regional activity (SOPAC 2005). These regional
This report aims to build an understanding of
implementation activities align with the three-tiered
///
the existing DRFI needs and tools in use in the
disaster risk financing strategy promoted by the Cook Islands. Specifically, it aims to encourage
///
World Bank. peer exchange of regional knowledge through
dialogue on past experiences, lessons learned,
optimal use of these financial tools, and their
effect on the execution of post-disaster funds.
Figure 1 — Three-Tiered Disaster Risk Financing Strategy
International Assistance
Low Frequency/
High Severity
Risk Transfer
Sovereign Risk Transfer
(e.g. Cat Bond/Cat Swap, (re)insurance)
Insurance of Public Assets
Contingent Credit Lines Post Disaster Credit
Risk Retention
Section
High Frequency/
Low Severity
Government Reserves, Contingency Budget / Funds
Source: World Bank 2010.
01
Emergency Funding Reconstruction
06 PCRAFI THE COOK ISLANDS
Economic Impact of
Natural Disasters
Since 1955 the Cook Islands has experienced a
/// Because of its high exposure to severe
///
total of 28 natural disasters that have cost in tropical cyclones, the Cook Islands is among
total approximately NZ$65.4 million (US$53.6 the 30 countries that experience the highest
average annual disaster-related losses in
million) (SPC-SOPAC 2011). Cyclones account
terms of gross domestic product (GDP).
///
for 86 percent of past disasters (24 of 28), with
///
Average annual disaster-related losses in the Cook
epidemics and earthquakes accounting for 11 Islands are estimated at 2 percent of GDP (World
percent and 4 percent, respectively (SPC-SOPAC Bank 2011).
2011). Of the NZ$65.4 million (US$53.6 million)
The recovery and reconstruction program
in disaster loss recorded in the Cook Islands, 100
///
following TC Pat (2010) was equivalent to 10
percent is attributable to tropical cyclones. It should
percent of national revenue in 2012 terms,
be noted that the cost of disasters presented above or 3.5 percent of GDP. In 2012, tax revenue was
///
reflects only 10 cyclone events.
Figure 2 — Building Locations
166° W 164° W 162° W 160° W 158° W
0 150 300 600 Aitu- 012 4
Arutanga
8° S
taki Kilometers
Kilometers
10° S
Atiu
Mangaia
12° S
012 4
0 1 2 3
14° S
Buildings
Residential Public
Avarua
Rarotonga
16° S
Commercial Other
Industrial
Section
18° S
Atiu
Aitutaki
02
20° S
Rarotonga
Mangaia
22° S
Cook Islands 0 2 4 8
Source: PCRAFI 2011.
THE COOK ISLANDS PCRAFI 07
Figure 3 — Direct Losses by Return Period
400
DIRECT LOSSES (MILLION USD)
300
200 TC + EQ
TC
EQ
100
Source: PCRAFI 2011
0 Note: TC = tropical cyclone; EQ = earthquake.
0 100 200 300 400 500 600 700 800 900 1000
MEAN RETURN PERIOD (YEARS)
approximately NZ$100 million (US$81.9 million). among the best-performing Pacific economies,
This narrow revenue base poses problems for with GDP per capita around NZ$15,477
stable public financial management in the Cook (US$12,686) in 2012 (ADB 2013).
Islands, just as it does for many other Pacific Island
The build-up of assets along the coastline
Countries (PICs).
///
of the capital, Rarotonga, has increased
The economy is driven by tourism, pearl
/// the country’s vulnerability and exposure to
farming, fishing, and agriculture, all of which damage from tropical cyclones and storm
are susceptible to adverse weather conditions. /// surge (see figure 2). Coastal construction has been
///
Emigration poses problems for skilled labor-force driven by the tourism industry, which seeks to offer
availability to support the tourism industry, in tourists direct access to the waterfront. The risk of
particular, and it has led to an increase in the damage from tropical cyclones and storm surge
number of migrant workers in the tourism sector. has increased with this development, since many
Notwithstanding these issues, the Cook Islands is natural barriers that protect the coastline have
Figure 4 — Average Annual Loss by Area
166° W 164° W 162° W 160° W 158° W
0 150 300 600 Aitu- 012 4
Arutanga
8° S
taki Kilometers
Kilometers
10° S
Atiu
Mangaia
12° S
012 4
0 1 2 3
14° S
Building Replacement Cost Density
(million USD / km^2) Avarua
Rarotonga
16° S
0 - 0.5 1-5 15 - 20
0.5 - 0.75 5 - 10 20 - 30 Section
0.75 - 1.0 10 - 15
18° S
Atiu
02
Aitutaki
20° S
Rarotonga
Mangaia
22° S
Cook Islands 0 2 4 8
Source: PCRAFI 2011
08 PCRAFI THE COOK ISLANDS
been removed to create uninterrupted views of the
ocean.
The Cook Islands is expected to incur, on
///
average, about NZ$6 million (US$4.9 million)
of losses per year due to tropical cyclones. ///
In the next 50 years, the Cook Islands has a 50
percent chance of experiencing a loss exceeding
NZ$97 million (US$79.5 million) and a 10 percent
chance of experiencing a loss exceeding NZ$327
million (US$268 million) (see figure 3).
Figure 4 shows the modeled average annual loss
by area, with red indicating high levels of average
annual losses—in the range of NZ$0.6 million to
NZ$0.8 million (US$0.49 million–US$0.65 million).
The full risk profile can be found in annex 4.
Photo Credit
/// ///
Phillip Capper/Flickr b
THE COOK ISLANDS PCRAFI 09
Public Financial
Management of
Natural Disasters
In 2007, Emergency Management Cook Islands
/// but could not access the funds needed to facilitate
(EMCI) was moved from the supervision of action.
the police to the Office of the Prime Minister
Effective post-disaster financial response relies on
(OPM). This move gave EMCI greater political
two fundamental capabilities:
visibility and resources: its annual budget
///
allocation more than doubled, from NZ$46,000 (a) The ability to rapidly mobilize funds post-
(US$37,700) in 2006 to NZ$102,000 (US$83,600) disaster; and
in 2007. The budget allocation for the 2013
(b) The ability to execute funds in a timely,
financial year was NZ$105,542 (US$87,500) for
transparent, and accountable fashion.
operational and capital costs.
This section discusses the Cook Islands’ existing
The Cook Islands has a proactive approach
procedures for post-disaster budget mobilization
///
to DRFI, which is supported by the upper
and execution and where possible provides
echelons of government. In January 2011, the
examples of their use.
///
prime minister in his role as chair of the National
Disaster Risk Management Council requested that
the Ministry of Finance and Economic Management
(MFEM) look at ways to become self-reliant in
initial disaster response and generate new income
streams for investment in a fund specifically for
disaster response and recovery.
The demand for self-reliance followed a
Section
///
delayed response to TC Pat in 2010, which
caused widespread devastation on the island
of Aitutaki. National agencies wanted to respond
///
03
10 PCRAFI THE COOK ISLANDS
Post-Disaster (the ERTF) and has purchased catastrophe risk
insurance with a maximum payout of NZ$3.4
Budget Mobilization million (US$2.79 million) under the Pacific
Catastrophe Risk Insurance Pilot. While these
The MFEM is heavily involved in disaster
steps do not negate the need for international
///
response, and the financial secretary sits on
assistance, they provide dedicated funds for
the Response Executive, a committee that
initial response and ensure that the government
is required to report directly to the cabinet.
maintains control during this crucial period.
///
The role of the Response Executive is to provide
advice and support to ensure effective emergency Mobilizing ex-post financial measures (such
///
response and initial relief coordination. It is as budget reallocation) and the contingency
primarily concerned with systematic acquisition fund can take between one and two weeks. ///
and distribution of resources in accordance with A Statement of Disaster will generate access
requirements imposed by the national emergency to the ERTF, but use of the contingency fund
or declared disaster. and reallocation of funds (even within the same
ministry) may take one to two weeks to mobilize,
Following response to TC Percy in 2005 and
given that both require cabinet approval. The
///
TCs Pat and Oli in 2010, the MFEM has taken
cabinet sits every week, so it is unlikely but not
an ex-ante approach to DRFI. To help finance
impossible that the reallocation of funds could
///
immediate relief, it has established NZ$500,000
take as long as two weeks to mobilize. Table
(US$409,000) in dedicated domestic reserves
Table 1— Sources of Funds Available
SHORT TERM MEDIUM TERM LONG TERM
(1-3 MONTHS) (3-9 MONTHS) (OVER 9 MONTHS)
Ex-post Financing
Donor Assistance (relief)
Budget Reallocation
Domestic Credit
External Credit
Capital Budget Realignment
Donor Assistance (reconstruction)
Tax Increase
Flash Appeal
Ex-ante Financing
Emergency Fund
Contingency Budget
Contingent Credit
Sovereign (parametric) Catastrophe
Section Risk Insurance
Traditional Disaster Insurance
03
Source: Government of the Cook Islands; World Bank.
THE COOK ISLANDS PCRAFI 11
Box 1— The Pacific Catastrophe Risk Insurance Pilot
The Pacific Catastrophe Risk Insurance Pilot aims to provide
/// government in the aftermath of a severe natural disaster that disrupts the
immediate budget support following a major tropical cyclone or provision of government services. Countries can choose between three
earthquake/tsunami. The insurance is designed to cover emergency
/// layers of coverage—low, medium, and high—depending on the frequency
losses, which are estimated using both a modeled representation of the of events. The lower layer will cover events with a return period of 1 in 10
event based on hazard parameters and a calculation of total modeled years, that is, more frequent but less severe events. The medium layer will
physical damage. Unlike a conventional insurance scheme, where a payout cover events with a 1-in-15-year return period, while the higher layer will
would be assessed against actual incurred costs, this scheme pays out on cover less frequent but more severe events, or those with a return period
the results of a model. The advantage of this approach is that it results in of 1 in 20 years. However, countries may request that a more customized
a much faster payout. The payout would act as a form of budget support option be developed for them.
and would go some way to cover the costs that would be incurred by the
1 provides an indication of when funds can be takes to mobilize these funds and the amount of
mobilized and where possible the amount of funds available.
funding available.
Ex-Ante Practices and Arrangements
The Cook Islands has a variety of ex-ante
///
and ex-post financial tools, and the timing The uncertainty surrounding international
for mobilizing and executing these funds assistance following a disaster has placed pressure
varies significantly. Building on the World Bank
///
on countries to establish domestic sources of
framework for disaster risk financing and insurance finance for post-disaster relief, such as the
(see annex 1), table 1 shows the ex-ante and establishment of national reserves or the transfer
ex-post financial tools available, specifies those of risk to the international insurance market.
utilized by the Cook Islands, and gives indicative The ex-ante practices and arrangements that
timings. The tools utilized by the Cook Islands are have been made by the Cook Islands include a
highlighted in blue. Those sections highlighted in contingency budget, the ERTF, and sovereign
gray are for generic instruments that to date have catastrophe risk insurance.
not been used in the Cook Islands.
Contingency budget
The sections below discuss in detail the ex-ante
Section 70b(i) of the Cook Islands Constitution
and ex-post finance tools available to the Cook
///
sets a cap on the contingency budget
Islands, including information on the time it
equivalent to 1.5 percent of the total sums
Section
03
12 PCRAFI THE COOK ISLANDS
appropriated (Government of Cook Islands the following: deployment of initial damage
2004). These sums were the equivalent of assessment team(s); reestablishment of essential
NZ$1.7 million (US$1.4 million) for the 2012/13 services; deployment of appropriate ministry staff
fiscal year. It should be acknowledged, however,
/// from Rarotonga to assist or relieve staff on the
that the contingency budget is not exclusively outer islands; deployment of skilled volunteers,
for disaster response, and it is unlikely that the tools, parts, and machinery to assist with clearance
full amount would be available in the event of and immediate repairs; transport, accommodation,
a disaster. food, and water for volunteers and relief workers;
and all costs associated with either air or sea
Emergency Response Trust Fund
freight (ERTF Policy 2011).
Following the prime minister’s request
///
The ERTF was fully operational and had
///
that the country become self-reliant in the received an appropriation from the annual
provision of initial disaster response, EMCI budget by December 2011, less than 12
collaborated with the MFEM and the Ministry months after it was initially discussed. ///
of Infrastructure and Planning (MOIP) to Following its establishment and receipt of the
establish the Emergency Response Trust initial appropriation, the ERTF received additional
Fund. Led by EMCI, these agencies within one
///
funds from the government and the Pacific Islands
year were able to draft a policy for the ERTF that Forum Secretariat to establish a minimum reserve
was approved by the cabinet. This policy details of NZ$500,000 (approximately US$409,000).
the budget execution process, the reporting It is expected that the fund will be increased to
requirements to ensure that expenditures are reach NZ$1 million (US$819,000). The country’s
transparent and accountable, and the role of the experience with the ERTF demonstrates the
trustees’ management committee. importance of ex-ante cooperation between
government agencies, and suggests how quickly
The purpose of the ERTF is to enable a swift
///
procedures can be developed when several
and coordinated response by the Disaster
agencies work together to remove barriers to
Response Executive once a State of Emergency
effective post-disaster budget execution.
or State of Disaster is activated. The fund ///
is limited to emergency response, including
Sovereign catastrophe risk insurance
Table 2— Selected Insurance Coverage, 2014–2015 Pilot Season
TROPICAL CYCLONE
Policy period November 1, 2013–October 31, 2014
Peril selected Tropical cyclone
Layer of coverage selected 1 in 10 years
Coverage limit as a percentage of contingency
200 percent
budget
Section
Reporting agencies Joint Typhoon Warning Center
Source: World Bank and PCRAFI 2013.
03
THE COOK ISLANDS PCRAFI 13
Table 3— Total Operating Expenditure, Fiscal Year 2013/14
PERCENTAGE OF TOTAL
2013 NZ$ MILLION US$ MILLION
EXPENDITURE
Payments on behalf of the
78.4 64.2 66%
Crown
Operating 28.5 23.4 24%
Othera
11.9 9.8 10%
Total budget 118.8 97.4 100%
Source: MFEM 2013; World Bank
Note: a. This comprises airport authority, debt-servicing interest, and depreciation.
The Cook Islands has financed its premium
/// coverage—that is, they chose coverage for more
in an innovative way: by collaborating with frequent but less severe events.
state-owned enterprises (SOEs). The SOEs find ///
In the event that the Cook Islands
it difficult to access insurance for infrastructure
///
experiences a tropical cyclone with an
in the insurance marketplace. To overcome this
estimated emergency loss2 that exceeds the
problem, the Cook Islands has arranged to fund
attachment point, it will be eligible for a
half of its premium through SOE contributions
payout equivalent to over double the annual
and half through a contribution from the national
contingency budget. Events that generate an
budget; the SOEs will receive 50 percent of any
///
emergency loss beneath the attachment point
payout. The MFEM and SOEs agreed to finance the
must be managed by optimizing the use of other
premium in this way as a form of self-insurance;
financial tools.
it is recommended that they consider increasing
their insurance coverage in the future. This is a
Ex-Post Practices and Arrangements
model that could be considered by other countries
participating in the pilot program. A disaster often exceeds a country’s capacity
to cope with such an event, and there will
The Cook Islands’ participation in the Pacific
generally be a need for ex-post practices and
///
Catastrophe Risk Insurance Pilot provides
arrangements. An optimal strategy for DRFI relies
access to an injection of liquidity within
on a combination of ex-ante and ex-post financial
the first month of a qualifying disaster. This
instruments. Ex-post arrangements benefit from
///
coverage came into effect on November 1, 2014,
being able to establish the extent of the disaster
and was renewed on November 1, 2015. The Section
and prioritize the response needs. As a result these
Cook Islands opted for coverage against tropical
arrangements take longer to implement than ex-
cyclones (see table 2) and chose the lower layer of
ante arrangements, but they can often mobilize
03
14 PCRAFI THE COOK ISLANDS
Photo Credit
/// ///
Australian
Department of
Foreign Affairs
and Trade/
Flickr b
larger amounts of finance. This section discusses a summary of the total operating expenditure
the ex-post practices and arrangements that have for the financial year 2013/14. It is estimated
been made by the Cook Islands. that approximately NZ$28.5 million (US$23.4
million), or 24 percent, can be reallocated from the
Budget reallocation operating expenditures in between departments
within the same ministry with the approval of the
Under the Ministry of Finance and Economic
///
minister and the financial secretary.
Management Act 1995/1996, ministries
may transfer operational funds between
External credit
departments with the agreement of the minister
///
responsible and the financial secretary. Any ministry In 2012/13 gross debt servicing was
///
spending over its appropriation as a result of approximately NZ$4.8 million (US$3.9 million)
///
these transfers will be investigated by the Public and included loans from New Zealand and the
Expenditure Review Committee, which may direct Asian Development Bank, both major development
that funds to be repaid from any subsequent partners to the Cook Islands. Debt outstanding as
appropriation. of June 30, 2012, was NZ$93.6 million (US$76.2
million), an 18 percent reduction from 2010.
In 2012/13, the Cook Islands adopted the
Annual debt service is equivalent to 4.4 percent of
///
Section Government Finance Statistics (GFS) format
recurrent expenditure (MFEM 2013).
of the International Monetary Fund (IMF) to
present Crown expenditures. Table 3 shows
03
///
THE COOK ISLANDS PCRAFI 15
The Cook Islands is in the process of
/// organizations, businesses, and individuals
establishing a fund for debt repayment, the contribute in the form of cash grants and aid in
Loan Repayment Fund (LRF). The LRF would
/// kind. The provision of aid in kind, while vital, can
manage the repayment of government debt and affect the costs borne by governments for the
of guaranteed debt of SOEs. The government is distribution these goods.
to deposit funds in the LRF annually to provide
Donor assistance for reconstruction often
for the repayment of all government borrowing
///
takes significant amounts of time and
and government guaranteed borrowing. Annual
requires negotiation between the country
contributions to the LRF are to be based on the
and its donors to establish key priorities.
debt service requirements for the year.
///
Significant amounts of finance can be assigned,
The Cyclone Emergency Assistance Project
/// however. For example, New Zealand Aid provided
with the Asian Development Bank provided NZ$6.4 million (US$5.3 million) to support the
a NZ$4.8 million (US$3.9 million) loan to help Aitutaki Cyclone Recovery and Reconstruction
with the recovery efforts following the series Plan (ACRRP). Reconstruction financing may be
of cyclones that affected the Cook Islands conditional and may be aligned to donor rather
in 2005. This loan took four months to approve,
/// than national priorities.
significantly delaying the necessary relief and
recovery work and demonstrating the need to have Total Response Funds Available
access to a pre-agreed upon line of contingent
The Cook Islands has a maximum amount
///
credit to minimize disruption to the provision of
of NZ$5.6 million (US$4.6 million) available
relief and recovery.
to facilitate disaster response. This amount is
///
Given the structured management of existing
///
equivalent to 4 percent of gross total appropriation
debt, the use of contingent credit could be and 1.7 percent of GDP in 2011. Figure 8 shows
explored as an alternative to securing cash the three-tiered DRFI strategy alongside the
reserves for disaster response. MFEM expressed
///
sources of funds and the maximum amounts of
an interest in optimizing the use of contingent funding available to the Cook Islands following
credit as an alternative to increasing the level of an event. However, it should be acknowledged
cash held in the ERTF. that the contingency budget is not exclusively for
disaster response, and it is unlikely that NZ$1.7
Donor funds for relief
million (US$1.4 million) would be exclusively
and reconstruction available for response. Consequently, there is likely
to be a gap between the amount available from
While donor funds will always be required
the contingency and ERTF before a payout may be
///
following disaster, there is often an element
triggered by breaching the selected attachment
of uncertainty surrounding how much
point of the catastrophe risk insurance pilot. It
will be provided, what will be provided, and
is estimated that there is a 4.9 percent chance
///
when funds will arrive in country. Consequently,
in any year that disaster losses will exceed these
overdependence on international relief as a
contingency funds.
source of post-disaster financing can delay the
Section
provision of initial relief and inhibit ex-ante
contingency planning. Development partners,
03
international organizations, local nongovernmental
16 PCRAFI THE COOK ISLANDS
Post-Disaster aid-coordinating agencies to ensure timely and
accurate processing and reporting of expenditure.
Budget Execution The total cost of the ACRRP was NZ$597,074
(US$489,000) under the planned budget
Following TC Pat in 2010, the Cook Islands
(ACRRP 2013).
///
government reallocated NZ$2.7million
(US$2.2 million) from its outer islands budget Following a Statement of Disaster or a
///
to reestablish essential services and for
///
Statement of Emergency by the prime
infrastructure support; the aim was to enable minister under part 3 or 4, respectively, of the
businesses to resume immediate operations so Disaster Risk Management Act (Act No. 33) of
that the locals could assist with recovery efforts. 2007, the funds contained within the ERTF can
An additional NZ$6.4 million (US$5.2 million) be disbursed for any purchases deemed necessary
///
was provided by New Zealand Aid to support by the fund’s trustee management committee.
the ACRRP. There are four trustees on the committee: the
national controller, director of EMCI, secretary of
The completion report for the ACRRP suggests
MOIP, and the financial secretary. Upon agreement
///
that overall financial management could be
within the committee, all funds can be spent
improved through personnel secondments
if required in order to facilitate response. The
from MFEM. The report indicated that overall,
fund is to be administered in accordance with
///
financial management processes could have been
Cook Islands Government Financial Policies and
better coordinated between the implementing and
Figure 5 — Amount of Ex-Ante Funds Available for Immediate Response
Section
Source: World Bank.
03
THE COOK ISLANDS PCRAFI 17
Photo Credit
/// ///
US Navy /Flickr b
Procedures, specifically the MFEM Act (Act No. 21 staff training and to develop a dedicated post-
of 1995/96), and the draft Trust Fund Procedures. disaster budget execution manual to ensure swift
post-disaster mobilization and execution when
Although ERTF procedures and processes are
next required.
///
well documented, there appears to be limited
awareness of them within MFEM. Given the ///
small number of staff in the department this is not
surprising; it is likely that those initially involved
have moved to positions elsewhere in government.
In small island states it is easy for institutional
knowledge be lost upon the departure of a few key
individuals.
The Cook Islands has developed policies and
///
procedures well founded on past experiences. ///
The government has dedicated, yet limited, funds
Section
that can be accessed following an event, but not
all staff are aware of the procedures involved in
03
accessing them. It would be helpful to carry out
18 PCRAFI THE COOK ISLANDS
Domestic Catastrophe
Risk Insurance Market
The insurance market in the Cook Islands is
/// There is a high uptake of insurance by the
///
small, with the portfolio for general insurance private sector, particularly in the tourism
premium estimated to be NZ$8.2 million ///
industry, where it is estimated that 80 percent
(US$6.7 million), including aviation. There is one of operators purchase property insurance. ///
local insurance provider who holds NZ$4.4 million Almost all these policies include tropical cyclone
coverage, and some of the policies include
(US$3.6 million) of the market, while the remainder
coverage against sea surge. In addition, many
is placed offshore. Insurance agents and brokers
tourism industry operators, irrespective of size,
placing risk offshore are required to report back to
hold business interruption insurance.
the Financial Supervisory Commission (FSC) with
details of those offshore placements. The Cook Islands is exposed to the
///
catastrophic peril of cyclones. It is located in
///
Insurance law and regulation within the
///
the Southern Hemisphere tropical cyclone zone,
Cook Islands is governed by the Insurance and though the cyclone season officially runs
Act (2008), the Insurance Code (2010), and from November to May, tropical storms may
Insurance Regulations (2009). Insurance
///
occur outside this period. There have been few
supervision is the responsibility of the FSC. earthquakes or tsunami events in the Cook Islands.
Photo Credit
/// ///
Australian Department of Foreign Affairs and Trade/Flickr b
THE COOK ISLANDS PCRAFI 19
Insurance for catastrophe insurance perils
///
of earthquake and cyclone are available in
the market and can be included in property
insurance products. Cyclone insurance is not
///
covered under standard property coverage
wordings, and is available by extension only.
Property insurance rates for the cyclone peril are
0.45 percent in the Cook Islands, which is higher
than the rate in most other Pacific countries. Rates
for the earthquake peril are 0.12 percent, around
the Pacific average.
The Cook Islands government does have
///
an indemnity property insurance program
in place for the majority of its assets.
The program is arranged by Cook Islands
Investment Corporation (CIIC). It does not
///
insure buildings under NZ$50,000 in value, and
many infrastructure assets are not insured. Cyclone
insurance is not included in this program.
SOEs have independent indemnity property
///
insurance programs in place for the majority
of their assets. Cyclone insurance is not
///
included in the majority of these programs. SOEs
contributed 50 percent of the premium for the
parametric pilot insurance program in 2013.
Please refer to annex 3 for the full market
insurance review that was conducted in the
Cook Islands.
Section
04
20 PCRAFI THE COOK ISLANDS
Options for
Consideration
The Cook Islands has implemented several DRFI recovery. The government has expressed interest
instruments to increase its financial protection in establishing access to credit in advance of an
against disasters. Some actions that would event so that the funds can be received as soon as
strengthen this work further are outlined below for required without any negotiation.
consideration.
Recommendation 3: Develop an operations
///
Recommendation 1: Develop an overarching
///
manual detailing the processes required
disaster risk financing strategy aligned to to facilitate swift post-disaster budget
existing processes. The Cook Islands has taken a
///
mobilization and execution. This document
///
proactive ex-ante approach to DRFI. However, the would build on the procedures established for
activities in place have been developed in isolation, the ERTF and refer to emergency procurement
and while some processes are documented, this procedures in place. A manual that detailed
information can be difficult to find. An overarching existing practices in a single document would help
DRFI strategy could be developed, and possibly staff understand correct procedures by formalizing
endorsed by the cabinet, in order to create a single existing processes—such as the allocation of a
document that would articulate the financing member of staff from MFEM to the EMCI—that
options available and associated policies behind are now conducted on a goodwill basis . Such
these tools. It would be complemented by an processes are at risk of lapse when they rely on a
action plan for implementation. few key individuals in government, as is the case in
the Cook Islands.
Recommendation 2: Investigate the use of
///
contingent credit to complement existing Recommendation 4: Develop an insurance
///
finance options. The Cook Islands has a strong
///
program for key public assets. This program
///
history of using credit to its best advantage would identify possible assets to be included,
and has developed the LRF to ensure prudent investigate existing insurance coverage provided
management of debt in the future. Having access in country, and develop a table detailing coverage
to a line of contingent credit that has been agreed options by provider to help determine which assets
Section
upon in advance could prove a useful way to to include in the program and to select appropriate
access cash following a disaster and could help coverage. This program could investigate the use
05 minimize disruption to the provision of relief and of an insurer vehicle if appropriate.
THE COOK ISLANDS PCRAFI 21
End Notes
1 Priority for Action 4—“Reduce the Underlying Risk Factors”—
has an associated key activity of financial risk-sharing mecha-
nisms, such as insurance, while Priority for Action 5—“Strengthen
disaster preparedness for effective response at all levels”—in-
cludes the establishment of emergency funds such as contingency
budget, national reserves, and annual budgetary allocations. See
UNISDR (2005).
2 Emergency loss is estimated as a percentage of direct losses,
which include the cost of repairing or replacing damaged assets.
Section
05
22 PCRAFI THE COOK ISLANDS
References
ACRRP (Aitutaki Cyclone Recovery and Reconstruction Plan). SOPAC (Pacific Islands Applied Geoscience Commission). 2005.
2013. “Aitutaki Cyclone Recovery and Reconstruction Plan “Pacific Disaster Risk Reduction and Disaster Management
Draft Completion Report.” Ministry of Finance and Economic Framework for Action (Regional Framework for Action or RFA)
Management, Rarotonga, Cook Islands. 2005–2015.” SOPAC, Suva, Fiji.
ADB (Asian Development Bank). 2013. “Asian Development Bank SPC-SOPAC (Secretariat of the Pacific Community, Applied
and Cook Islands Fact Sheet.” ADB, Manila, Philippines. Geoscience and Technology Division). 2011. “Investment in
DRM—Cook Islands.” Secretariat of the Pacific Community,
Cyclone Recovery Committee. 2006. “Cyclone Recovery Recon-
Suva, Fiji.
struction Plan 2006–2009.” Ministry of Finance and Economic
Management, Aid Management Division, Rarotonga, Cook SPC (Secretariat of the Pacific Community) 2011 Cook Islands:
Islands. Investment in DRM, Suva, Fiji
Cyclone Recovery Committee, ———. 2010. “Cyclone Pat SPC (Secretariat of the Pacific Community) 2011 Fiji: Investment
Recovery and Reconstruction Plan 2010–2011.” Office of the in DRM, Suva, Fiji
Prime Minister, National Policy and Planning, Rarotonga, Cook SPC (Secretariat of the Pacific Community) 2011 Republic of
Islands. Marshall Islands: Investment in DRM, Suva, Fiji
GFDRR (Global Facility for Disaster Reduction and Recovery) SPC (Secretariat of the Pacific Community) 2011 Vanuatu: Invest-
2012 The Sendai Report: Managing Disaster Risks for Resilient ment in DRM, Suva, Fiji
Future, Washington D.C., U.S.A.
SPC (Secretariat of the Pacific Community) 2012 Papua New
Government of Cook Islands 2009, National Action Plan for Disas- Guinea: Investment in DRM, Suva, Fiji
ter Risk Management (2009- 2015), Cook Islands and Pacific
SPC 2012 “Investment in DRM—Cook Islands.” Secretariat of the
Islands Applied Geoscience Commission (SOPAC), Suva.
Pacific Community, Suva, Fiji.
Government of Cook Islands. 2004. Constitution of the Cook UNISDR (United Nations International Strategy for Disaster
Islands with Amendments as of 2004. Government of Cook Reduction). 2005. Hyogo Framework for Action 2005–2015:
Islands, Rarotonga, Cook Islands. Building the Resilience of Nations and Communities to Disas-
———. 2009. “National Action Plan for Disaster Risk Manage- ters. UNISDR, Hyogo, Japan.
ment (2009–2015).” Cook Islands and Pacific Islands Applied World Bank 2010 Financial Protection of the State against Natural
Geoscience Commission (SOPAC), Suva, Fiji. Disasters; A Primer, Washington D.C., U.S.A.
———. 2011.” Joint National Action Plan for Disaster Risk World Bank. 2011. Pacific Catastrophe Risk Financing Initiative:
Management (2011–2015).” Cook Islands and Pacific Islands Catastrophe Risk Assessment and Options for Regional Risk
Applied Geoscience Commission (SOPAC), Suva, Fiji. Financing. Phase 1 Report. Washington, DC: World Bank.
Government of Cook Islands. 2013. “Cook Islands Government
Appropriation Amendment 2012/2013.” Ministry of Finance
and Economic Management, Rarotonga, Cook Islands.
Section Government of Cook Islands. 2013. “Cook Islands Government
Budget Estimates 2012/2013.” Ministry of Finance and Eco-
nomic Management, Rarotonga, Cook Islands.
05 PCRAFI (Pacific Catastrophe Risk and Financing Initiative). 2011.
“Country Risk Profile: Cook Islands.” September. [http://pacris.
sopac.org](http://pacris.sopac.org).
23 PCRAFI THE COOK ISLANDS
About PCRAFI
The Pacific Catastrophe Risk Assessment and disaster risk financing strategy and focus on three
Financing Initiative (PCRAFI) is a joint initiative core aspects:
between the Secretariat of the Pacific Community
• the development of a public financial
through its Applied Geoscience and Technology
management strategy for natural disasters,
Division (SPC-SOPAC), the World Bank, and the
recognizing the need for ex-ante and ex-post
Asian Development Bank, with financial support
financial tools;
from the government of Japan, the Global Facility
for Disaster Reduction and Recovery (GFDRR), and • the post-disaster budget execution process,
the European Union, and with technical support to ensure that funds can be accessed and
from Air Worldwide, New Zealand GNS Science, disbursed easily post-disaster; and
and Geoscience Australia.
• the insurance of key public assets, to resource
The initiative aims to provide the Pacific Island the much larger funding requirements of
Countries (PICs) with disaster risk modeling recovery and reconstruction needs.
and assessment tools for enhanced disaster risk The PICs involved in PCRAFI are the Cook Islands,
management, and to engage PICs in a dialogue the Federated States of Micronesia, Fiji, Kiribati,
on integrated financial solutions to increase their the Marshall Islands, Nauru, Niue, Palau, Papua
financial resilience to natural disasters and climate New Guinea, Samoa, the Solomon Islands, Timor-
change. The initiative is part of the broader agenda Leste, Tonga, Tuvalu, and Vanuatu.
on disaster risk management and climate change
For further information, please visit
adaptation in the Pacific region.
http://pacrisk.sopac.org or contact PCRAFI@spc.int.
The Pacific Disaster Risk Financing and Insurance
(DRFI) Program is one of the many applications
of PCRAFI. It is designed to increase the financial
resilience of PICs by improving their capacity
to meet post-disaster financing needs without
compromising their fiscal balance. Through DRFI,
technical assistance is available to PICs to build
Section
capacity in the public financial management of
natural disasters. The technical assistance will build
06 on the underlying principles of the three-tiered
24 PCRAFI THE COOK ISLANDS
Annex 1
World Bank Framework for Disaster Risk Financing
and Insurance
Major disasters increase public spending development projects (see figure A.2). This layer
requirements and reduce revenues, placing further uses tools such as contingency budgets and
strain on limited national budgets. The immediate national reserves. The aim is to finance small
and long-term fiscal consequences of a disaster but high-frequency disasters. The second layer is
depend on the sources of revenue available to aimed at less frequent but more severe events that
the government versus its public expenditure are too costly to pre-finance through retention
commitments. Investment in disaster risk financing mechanisms. Here, liquidity mechanisms—such as
instruments can help prevent the diversion of funds contingent credit, which can mobilize additional
from key development projects and significantly funds immediately following an event—become
reduce the time needed to activate an initial cost-effective.
response. Financial protection is a core component
of any comprehensive disaster risk management The third layer, disaster risk transfer (such as
strategy, and should be implemented alongside insurance), focuses on mobilizing large volumes
the pillars of risk identification, risk reduction, of funds for large but infrequent natural disasters.
preparedness, and post-disaster reconstruction (see For events of this type, risk transfer instruments—
figure A.1). such as insurance or catastrophe swaps and
bonds—become cost-effective in averting a
The World Bank framework for disaster risk liquidity crunch.
financing and insurance advocates a three-tiered
approach for the development of financing There is a clear time dimension to post-disaster
arrangements to cover the residual disaster risk funding needs and the various phases of relief,
that cannot be mitigated. These layers align to recovery, and reconstruction. Some financing
the basic principles of sound public financial instruments can be activated rapidly. Others
management, such as the efficient allocation may take longer to activate but can generate
of resources, access to sufficient resources, and substantial funding. The disaster risk financing
macroeconomic stabilization. The first layer, strategy needs to reflect both time and cost
Section
retention, relates to countries’ development of dimensions, ensuring that the volume of funding
an internal layer of protection against natural available at different stages in the response efforts
07 disasters to prevent the diversion of funds from matches actual needs in a cost-efficient manner.
THE COOK ISLANDS PCRAFI 25
Figure A .1 — Disaster Risk Management Framework
PILLAR 1: RISK IDENTIFICATION Improved identification and understanding of disaster
risks through building capacity for assessments and
analysis
PILLAR 2: RISK REDUCTION Avoided creation of new risks and reduced risks in
society through greater disaster risk consideration in
policy and investment
PILLAR 3: PREPAREDNESS Improved capacity to manage crises through developing
forecasting and disaster management capacities
PILLAR 4: FINANCIAL PROTECTION Increased financial resilience of governments, private
sector and households through financial protection
strategies
PILLAR 5: RESILIENT RECOVERY Quicker, more resilient recovery through support for
reconstruction planning
Figure A .2 — Three-Tiered Disaster Risk Financing Strategy
International Assistance
Low Frequency/
High Severity
Risk Transfer
Sovereign Risk Transfer
(e.g. Cat Bond/Cat Swap, (re)insurance)
Insurance of Public Assets
Contingent Credit Lines Post Disaster Credit
Risk Retention
High Frequency/
Low Severity
Government Reserves, Contingency Budget / Funds
Section
07
Emergency Funding Reconstruction
26 PCRAFI THE COOK ISLANDS
The initial relief phase requires a quick injection the funds for this phase can therefore be raised
of liquidity from day 0 but does not need to be via post-disaster budget reallocation and the
sustained for a long period of time (see figure realignment of national investment priorities.
A.3). Rapid budget mobilization and execution However, the opportunity cost for these options
are key for financing initial disaster response, and is high, given that they can lead to reduced
governments should develop appropriate policies expenditure on other key investment areas, such as
and procedures for procurement and acquittals
health and education. Consequently, governments
to facilitate them. Initial relief should be met via
may also choose to utilize development partner
annual budget allocations and the establishment
contingent credit arrangements.
of dedicated reserves for disaster response that
can be accessed immediately; major catastrophes In contrast, the reconstruction phase has much
will exhaust these funds quickly. The residual risk larger financing requirements needed over a
associated with higher-cost events should be much longer period of time (see figure A.3).
transferred to third parties via a mixture of more Given the large funding requirements associated
expensive (re)insurance tools and catastrophe
with reconstruction, this phase often requires
bonds and, for the most extreme events,
post-disaster reconstruction loans to complement
international assistance.
traditional disaster insurance. Governments
The recovery phase requires additional funds may also introduce temporary post-disaster tax
but not immediately (see figure A.3). Some of increases aligned to budget restructuring.
Figure A .3 — Post-Disaster Phases: Funding Requirements and Duration`
Section
07
THE COOK ISLANDS PCRAFI 27
If adequate and timely funding arrangements are innovative nature of the work in this area and the
not in place, the adverse socioeconomic impact number of products under development, this list is
of a disaster can be significantly exacerbated, at not exhaustive.
both the macroeconomic and household levels.
Ex-post financing vehicles are those that become
An optimal disaster risk financing and insurance
available in the wake of an event. The most
strategy aims to combine ex-ante and ex-post
familiar form of ex-post disaster financing is
financial instruments to secure adequate and
donor assistance for relief. There are two forms
timely funding at lower cost for the successive
this finance can take, cash grants and aid in kind,
post-disaster phases. The optimal mix of finance
and both play an important role in response. The
instruments will be unique to each country based
provision of aid in kind, while vital, can affect the
upon its associated hazard and exposure. Table
distribution costs for these goods. While donor
A.1 lists potential finance instruments that can be
funds will always be required, there can often be
used to address disasters. Those that are shaded in
an element of uncertainty surrounding how much
blue indicate the generic timelines for mobilizing
will be provided, what will be provided, and when
and executing these funds, though each country
funds will arrive in country.
may be slightly faster or slower depending on its
internal processes. The table can be adapted by Budget reallocation often plays a key role for the
countries to reflect these differences according to continuation of relief and the initial stages of the
the financial instruments they have utilized and the recovery program. Generally, this process takes
time it takes to mobilize these funds. Given the time, as the reallocation of funds will need to be
Table A .1— Availability of Financial Instruments Over Time
SHORT TERM MEDIUM TERM LONG TERM
(1-3 MONTHS) (3-9 MONTHS) (OVER 9 MONTHS)
Ex-post Financing
Donor Assistance (relief)
Budget Reallocation
Domestic Credit
External Credit
Capital Budget Realignment
Donor Assistance (reconstruction)
Tax Increase
Flash Appeal
Ex-ante Financing
Emergency Fund
Contingency Budget
Contingent Credit
Sovereign (parametric) Catastrophe
Risk Insurance
Traditional Disaster Insurance Section
Source: World Bank 2013.
07
28 PCRAFI THE COOK ISLANDS
agreed upon by the cabinet and across ministries. Donor assistance for reconstruction can be
Budget reallocation can sometimes divert funds delivered as a form of direct budget support,
from key development projects and hence seriously grant, or a post-disaster reconstruction loan.
harm the long-term growth prospects of the The form of finance used here will depend on
country. The same issues are relevant to capital the size of the event, the development status of
budget realignment, although the timelines for a country (for example, low-income countries
that process are typically significantly longer. may have access to concessional loans and have
more access to grants), and the debt-servicing
Domestic credit, such as the issuance of
ratio of a country. Typically, this form of finance
government bonds, can be used to raise additional
is conditional and requires sufficient lead time for
revenue to fund post-disaster expenditures. Again,
aligning the priorities of countries and donors to
due to the processes involved, domestic credit will
meet reconstruction and recovery needs.
take some time to operationalize and is best suited
to financing recovery and reconstruction activities. Tax increases will help redress the increase in public
External credit will likewise take time to be expenditure following a disaster by generating
agreed upon with providers and will require clear additional revenue. Although higher taxes could
articulation of the activities it is to finance. Both of be politically unfavorable, they create a sustainable
Section
these forms of credit will have an impact on the source of finance for reconstruction activities.
debt-servicing ratio of a country and may not be a Conversely, some governments have applied tax
07 viable option for heavily indebted countries. incentives to encourage donations to response
THE COOK ISLANDS PCRAFI 29
funds from both the private sector and members of Parametric insurance uses hazard triggers, linking
the public. This approach can be popular when tax immediate post-disaster insurance payouts
credits are written off on annual tax returns. to specific hazard events. Unlike traditional
insurance settlements that require an assessment
Ex-ante financing provides an element of financial
of individual losses on the ground, parametric
certainty during a disaster, because governments
policies do not pay based on actual losses incurred.
have established these sources of finance in
Instead, the payout disbursements are triggered
advance. These funds can be quickly disbursed
by specific physical parameters for the disaster
following an event so that essential relief work
(e.g., wind speed and earthquake ground motion).
commences immediately. A reserve fund provides
The payouts provide a rapid, yet limited, injection
a dedicated amount of funding for response
of liquidity that can be a valuable boost to
and if properly managed can accrue over time to
relief funds.
increase the level of funding available. However,
the opportunity cost of holding money in a Traditional disaster insurance offers indemnity
dedicated fund is high, as it diverts funds from coverage. Receipt of funds may take longer than
the operational budget. Careful analysis should be with parametric insurance, as a detailed damage
undertaken to identify the optimal level of reserves assessment is required. However, as payouts
that a country should hold and maintain. are directly linked to the damage experienced,
the payout will better match the needs of the
Contingent credit is a relatively new instrument,
insured party.
with current forms offering disbursement following
an event whose magnitude has been agreed upon Public financial management in the Pacific is
in advance. It can be fungible or conditional by dictated by the fact that many PICs are classified
design. As with other sources of credit, the amount as Small Island Developing States (SIDS). Typically,
available will depend on the development status countries in this classification have a narrow
of the country and the debt-servicing ratio. The revenue base, are net importers, and have a
advantage of contingent credit is that a drawdown consequential reliance on aid as an income stream.
can be made within a 24-hour period. These characteristics can limit the options available
for post-disaster finance. It is unlikely that a SIDS
government could afford to reallocate the capital
30 PCRAFI THE COOK ISLANDS
budget, and a tax increase could make many items in post-disaster budget reallocation and build
unaffordable and hence be detrimental to citizens’ a case for establishing national reserves. While
quality of life. Given these constraints on the international assistance will always play a valuable
national budget, alternatives such as contingent role, overdependence on such assistance as a
credit and risk transfer options should be used to source of financing carries limitations; international
reduce the drain on limited public funds. aid can be uncertain, which inhibits contingency
planning, and can be slow to materialize.
PIC governments face critical challenges for
Increasingly, PICs such as the Cook Islands are
financial resilience to natural disasters. Most PICs
establishing national reserves for funding initial
have restricted options for securing immediate
response.
liquidity for swift post-disaster emergency response
without compromising their long-term fiscal The World Bank, SPC, and their partners, with
balance. In addition, PICs are constrained by their grant funding from the government of Japan, have
size, borrowing capacity, and limited access to implemented the Pacific Disaster Risk Financing
international insurance markets. In the absence of and Insurance Program to help the PICs increase
easy access to debt and well-functioning insurance their financial resilience to natural disasters and
markets, a large portion of the economic losses improve their financial response capacity in the
stemming from adverse natural events is borne by aftermath of natural disasters. This program is part
governments and households, with support from of the Pacific Catastrophe Risk Assessment and
development partners. Financing Initiative (PCRAFI).
The Pacific has seen several recent cases that show
the need for immediate liquidity post-disaster. In
the Cook Islands, in the immediate aftermath of
TC Pat in 2010, a delay in the receipt of travel
funds meant that key government personnel could
not immediately commence the initial damage
assessment. Following TC Vania in 2010, Vanuatu
had to reallocate a significant amount of the
national budget. Similarly, Fiji and Samoa had to
reallocate budgetary funds in the wake of TC Evan
in 2012 and 2013; and the Santa Cruz earthquake
in the Solomon Islands in February2013 drained
the annual budget for the National Disaster
Management Office and used the majority of the
national contingency budget.
Lacking contingency reserves and access to short-
term loan funds, PICs have limited post-disaster
budget flexibility and rely heavily on post-disaster
Section donor assistance. Studies by SPC (2011 and 2012)
that look at the fiscal impact of past disasters in
selected PICs demonstrate the financial constraints
07
THE COOK ISLANDS PCRAFI 31
Annex 2
G lossary
Attachment point. The attachment point (deductible) amount is essentially the excess payable before any
/// ///
payout is made under a policy. That is, anything under this value will be borne by the policy holder.
Catastrophe swap. A catastrophe swap, also known as a cat swap, is a financial tool used to transfer some
/// ///
of the risk that the covered party faces from catastrophes to the international reinsurance or capital markets.
In the case of the Pacific Catastrophe Risk Insurance Pilot, tropical cyclone and/or earthquake risk is passed
to the financial markets.
Coverage limit. This indicates the maximum payout as defined under the policy.
/// ///
Emergency losses. Emergency losses in the context of the Pacific Catastrophe Risk Insurance Pilot are
/// ///
calculated by using a percentage of the estimated ground-up losses.
Exhaustion point. The exhaustion point indicates the loss level at which the payout under a policy reaches
/// ///
its maximum point.
Ground-up losses. Ground-up losses in this context refer to estimated total damage to buildings,
/// ///
infrastructure, and cash crops.
Payout. A payout refers to the amount of cash that countries will receive following an eligible event.
/// ///
Premium. The premium is the cost that an insured party will pay for a given level of coverage: the more
/// ///
that is included in the coverage provided, the higher the premium will be. Premiums are determined by the
amount of coverage a country chooses, the event attachment point (deductible) and exhaustion point (limit)
of that coverage, and the risk profile of the country.
Risk pool. A risk pool is a group of people, institutions, or countries that collaborate to manage risk
/// ///
financially as a single group.
Section
07
32 PCRAFI THE COOK ISLANDS
Annex 3
Insurance Market Review, February 2014
Executive Summary May, tropical storms may occur outside this period.
There have been few earthquakes or tsunami
The insurance market in the Cook Islands is
///
events in the Cook Islands.
small, with the portfolio for general insurance
premium estimated to be NZ$8.2 million ///
Insurance for catastrophe insurance perils
///
(US$6.7 million), including aviation. There is one of earthquake and cyclone are available in
local insurance provider who holds NZ$4.4 million the market and can be included in property
(US$3.6 million) of the market, while the remainder insurance products. Cyclone insurance is not
///
is placed offshore. Insurance agents and insurance covered under standard property coverage
brokers placing risk offshore are required to report wordings, and is available by extension only. In
back to the Financial Supervisory Commission (FSC) the Cook Islands, property insurance rates for the
with details of those offshore placements. cyclone peril are higher (0.45 percent) than in most
other Pacific countries, and are around the Pacific
Insurance law and regulation within the
///
average for the earthquake peril (0.12 percent).
Cook Islands is governed by the Insurance
Act (2008), the Insurance Code (2010), and The Cook Islands government does have
///
Insurance Regulations (2009). Insurance
///
an indemnity property insurance program
supervision is the responsibility of the FSC. in place for the majority of its assets.
The program is arranged by Cook Islands
There is a high uptake of insurance by the
///
Investment Corporation (CIIC). It does not
///
private sector, particularly in the tourism insure buildings under NZ$50,000 in value, and
industry, where it is estimated that 80 percent many infrastructure assets are not insured. Cyclone
of operators purchase property insurance.
insurance is not included in this program.
///
Almost all these policies include tropical cyclone
coverage and some of the policies include sea State-owned enterprises (SOEs) have
///
surge coverage. In addition, many tourism industry independent indemnity property insurance
operators, irrespective of size, hold business programs in place for the majority of their
interruption insurance. assets. Cyclone insurance is not included in the
///
majority of these programs. SOEs contributed 50
Section The Cook Islands is exposed to the
percent of the premium for the parametric pilot
///
catastrophic peril of cyclones. It is located in the
insurance program in 2013.
///
Southern Hemisphere tropical cyclone zone, and
08 though the season officially runs from November to
THE COOK ISLANDS PCRAFI 33
Introduction There is one licensed insurance broker, Willis
/// ///
New Zealand Limited (Willis).
Insurance Market
Insurance may be placed offshore by an
///
In the Cook Islands, total non-life (general)
///
approved insurance agent or insurance broker
insurance premium, all classes including licensed under the Insurance Act. Those agents
///
aviation, is estimated at NZD$8.2 million and brokers must report back to the Financial
(US$$6.7 million). Estimates based on anecdotal
///
Supervisory Commission (FSC) with details of
evidence from insurance industry sources suggest those offshore placements. The main offshore
that of this amount, NZD$4.4 million (US$3.6 insurer used in the market is the London market
million), or 54 percent of the market, is placed with (including Lloyd’s), which is the major international
local insurer Tower Insurance Cook Islands Limited insurance market. Another offshore insurer used
(Tower), and the remaining NZD$3.8 million to provide some additional capacity is the New
(US$3.1 million) is placed with offshore insurers. India Insurance Company Ltd via branches in New
Zealand or London.
The non-life insurance industry within the
///
Cook Islands is limited to Tower as the only The non-life premium spending in the Cook
///
locally licensed company. Tower has a small
///
Islands, at NZ$417.2 (US$$342), is higher
local office with three employees who handle than comparable spending in other Pacific
direct domestic insurance, agency business, and Island Countries (PICs); see table 1. The higher
///
insurance for small and medium enterprises (SMEs). premium per capita could be driven by a number
The Auckland office of Tower manages insurance of factors, including higher market penetration
for corporate businesses. by non-life insurers, higher asset concentration as
a consequence of higher gross domestic product
There are four licensed insurance agents in
///
(GDP) per capita, issues with the pricing of policies
the market: Australian and New Zealand Banking
///
arising from a lack of competition in the market,
Group Limited (Cook Islands), Bank of Cook Islands higher exposure to natural perils, or a mix of these
Limited, Shaun Gallagher Insurance, and Richard ET factors. A single local insurer has the potential to
Fisher Insurance Services. restrict local competiveness for insurance products,
particularly for SMEs and personal insurance
Table A .1— Pacific Non-life Insurance Premium per Capita 2012 (US$)
GDP PER MARKET PREMIUM PER
MARKET GDP MILLIONS POPULATION
CAPITA PREMIUM CAPITA
Cook Islands $305 19,300 $15,823 $6,600,000 $342
Fiji $3,908 874,700 $4,467 $97,500,000 $111
Samoa $683 188,900 $3,619 $17,000,000 $90
Tonga $471 104,900 $4,495 $4,400,000 $42 Section
Vanuatu $781 247,300 $3,182 $16,500,000 $67
Source: World Bank; Cook Islands MFEM.
08
34 PCRAFI THE COOK ISLANDS
Table A .2— Pacific Commercial Property Insurance Rate and Deductible Comparison
AVERAGE GENERAL
AVERAGE CYCLONE GENERAL CYCLONE
MARKET EARTHQUAKE EARTHQUAKE
RATE DEDUCTIBLE
RATE DEDUCTIBLES
Cook Islands 0.12% 2% of sum insured 0.45% 20% of sum insured
Fiji 0.08% 10% of sum insured 0.30% 20% of loss
2% of sum insured or 2% of sum insured or
Samoa 0.12% 0.20%
5% of loss 5% of loss
Tonga 0.15% 5% of sum insured 0.25% 5% of sum insured
Vanuatu 0.30% 5% of loss 0.17% 20% of loss
Source: World Bank 2013.
Note: Tables shows average market rate percentage of value based on insurance industry sources.
buyers who do not have the ability to access the 2011) suggests, however, that the country’s
offshore insurance market. However, this report earthquake risk is extremely low. The local basis
does not seek to undertake a full quantitative rate for cyclone extension was quoted at 0.45
analysis of the appropriateness and competitiveness percent, considerably higher than the regional
of insurance pricing within the Cook Islands, range of 0.17 percent to 0.30 percent. Insurance
and so cannot comment on the degree to which intermediaries in the Cook Islands market advised
anticompetitive behavior is influencing pricing. that while 0.12 percent and 0.45 percent were
the local standard rates for earthquake and
There are a number of variables in property
cyclone perils, it was possible to negotiate for
insurance rating, such as location of premises,
larger corporate accounts or to place the business
construction, occupation, fire protection, frequency
with offshore markets. This type of negotiation
of expected losses, and the amount and type of
would be more difficult for SMEs or domestic
deductible on policies. It is not possible to use
homeowners, making insurance products less
average rating data as an exact basis for rating a
accessible to them due to price. However,
specific company, individual risk, or country. It is
the limitations of comparing rates (explained
possible, however, to offer a general comparison
above) should be considered when interpreting
of the property insurance rates in respective
this information.
markets (see table 2). The analysis below should be
interpreted with due consideration of the fact that Catastrophe Risk Insurance
corrections for differences in exposure to natural
perils, building stock, occupation, and financial The main catastrophe hazard in the Cook Islands
terms have not been made. is tropical cyclone. Tower advised it was aware
of the potential exposure and insured only those
Local property insurance rates in the Cook
///
properties that had an engineer’s certification of
Islands are higher than in other PICs. The local ///
compliance with the cyclone (wind load) standard.
earthquake insurance basis rate used in the Cook The Cook Islands’ primary accumulation exposure
Section
Islands is 0.12 percent, which is consistent with is on the main island of Rarotonga.
the earthquake basis rate used in other Pacific
08
countries; the Cook Islands risk profile (PCRAFI
THE COOK ISLANDS PCRAFI 35
According to the World Bank (1999), “Catastrophic as evidenced by the withdrawal of New Zealand Photo Credit
/// ///
US Navy /Flickr b
events are unique among insurance risks: while Insurance Ltd. in 1985 (Crocombe 1992).
traditional insurable risks occur with predictable
All insurers with catastrophe exposures need
frequency and relatively low losses, catastrophes
to obtain reinsurance to increase their capacity.
occur infrequently but with high losses.” For this
Reinsurance is even more important when the
reason, it is difficult for insurers to prepare for
insurer or the insurance market pool is small, such
catastrophe losses and obtain an appropriate
as in the Pacific. As regulators become increasingly
premium for these infrequent events. To reduce
vigilant about requiring insurers to have sufficient
the volatility that results from catastrophe events,
capital and a good solvency margin to protect
they undertake a mix of methods, including
their interests from catastrophic events, they are
portfolio management, underwriting selection
requiring adequate reinsurance programs, placed
(e.g., declining risks in high exposure areas), and
with robust reinsurers.
purchase of reinsurance.
The non-life premium per capita comparison (table
While the market is constrained by its small size,
1) demonstrates that the insuring public in the
some additional capacity is available offshore—
Cook Islands pays more in premiums per head
though in the past, the Cook Islands’ cyclone
than in other PICs. From the catastrophe peril rates
exposure has limited the willingness of New
comparison (table 2), it is clear that cyclone rates Section
Zealand–based insurers to provide such capacity,
are higher in the Cook Islands than in other PICs;
08
as a consequence, property premiums, particularly
36 PCRAFI THE COOK ISLANDS
for cyclone, will also be higher. The need to obtain Australia and Thailand, and a cyclone in Australia.
an engineer’s cyclone certification for buildings According to the Global Insurance Market Report
before obtaining cyclone insurance presents a (IAIS 2012), these Asia Pacific events accounted
challenge to the insuring public. These two factors for 61 percent of the insured losses from natural
are likely to restrict the access to cyclone insurance catastrophes in 2011, compared to a 30-year
in the Cook Islands, particularly for residential average of 18 percent. As a consequence, there
property owners and small businesses. were adjustments in reinsurance capacity and
higher risk premiums. In 2012 the natural disaster
Catastrophe Reinsurance losses dropped to US$77 million (Swiss Re 2013),
but this was still the third-highest year for natural
Tower advised that its operation in the Cook Islands
catastrophe insured losses since 1970. In the
is included in the group reinsurance program
Pacific, Tropical Cyclone Evan caused insured losses
arranged by Tower Insurance Limited.
of F$57 million in Fiji (Reserve Bank of Fiji 2012)
In 2011, natural catastrophe insured losses in the and estimated insured losses of SAT 3 million in
global reinsurance market were the second-largest Samoa in December 2012.
ever, at over US$110 billion (Swiss Re 2012).
In its 2011 annual report, Tower Insurance
What made this year significant for insurers (and
Limited specifically advised that its event excess
Section reinsurers) in the Pacific was the number of events
(net retention) had increased to NZ$6.7 million
that occurred in the Asia Pacific region, including
(US$5.5 million) and that it had protection for
earthquakes in New Zealand and Japan, floods in
08
THE COOK ISLANDS PCRAFI 37
two catastrophe events within the program for Regulatory Framework
the 2011–2012 period (Tower Limited/Tower
Capital Limited 2011). The reinsurance program Insurance Law and Regulation
is not detailed in the 2012 report, but it would
be expected to follow the previous arrangements. Insurance law and regulation within the
///
Tower did express concern in its annual reports at Cook Islands is governed by the Insurance
the increase in catastrophe reinsurance premiums Act (2008), the Insurance Code (2010), and
in recent years. Insurance Regulations (2009). Insurance
///
supervision is the responsibility of the FSC (Cook
Indeed, insurers throughout the Pacific have Islands Financial Supervisory Commission, 2014).
expressed concern at the recent increase in
reinsurance premiums, and more particularly The Insurance Code (2010) details the
///
premiums for catastrophe reinsurance. They have requirements for registered insurance
limited ability to pass on the full costs of these companies, including capital, solvency, and
increases to insured clients due to the small size reinsurance programs. Minimum capital for a
///
and economic constraints in those markets. local general insurer (category A) is NZD$200,000
(US$163,000) and minimum solvency is 5 percent
Market Property and Catastrophe
of unearned premium reserve or 10 percent of
Insurance Products outstanding claim reserve. There is no requirement
for the general insurer to hold a catastrophe
Tower uses Material Damage/Business reserve. A written reinsurance strategy must be
///
Interruption (MDBI) wordings for major submitted to the FSC each year in November. The
commercial, government, and state-owned FSC advised that it did not undertake a detailed
enterprise (SOE) insurance. The MDBI analysis of the submitted reinsurance strategy from
///
wording is based on insurance industry standard Tower because it lacked the necessary expertise
Industrial Special Risks (ISR) wordings used in and understanding of the reinsurance contracts.
many Commonwealth countries. These wordings
include cover of specified natural perils, such as The Cook Islands is not listed as a member
///
earthquake, but do not cover cyclone risk. of the International Association of Insurance
Supervisors (IAIS). Membership in IAIS would
///
Cyclone insurance is available in the Cooks
///
allow the Cook Islands to access international
Islands by extension only and is limited to those best practice information on insurance regulation
///
buildings with an engineering cyclone certificate and supervision.
that confirms the building meets the building code
for cyclone. The cyclone engineer’s certificates are The Cook Islands has recently enacted the
///
valid for seven years. Captive Insurance Act (2013) and Captive
///
Insurance Regulations. As of September 2013,
A Business Protection Policy is used for SMEs there were no captive insurers registered under the
/// ///
and is taken as either Multi Risks (accidental new legislation.
damage including earthquake and cyclone by
extension) or as Specified Risks (fire and extraneous Under existing insurance regulations, Tower
///
perils). These policies generally follow the perils is required to submit to the FSC its annual Section
insured under the MDBI, although coverage may reinsurance management strategy, which ///
be more restricted. would include risk accumulations and catastrophe
08
38 PCRAFI THE COOK ISLANDS
Table A .3— Property Insurance for Major Cook Island State-Owned Enterprises
REPLACEMENT
PROPERTY
EARTHQUAKE CYCLONE PERIL VALUE (LAST INFRASTRUCTURE
ENTITY INSURANCE
PERIL INCLUDED INCLUDED VALUATION DATE, ASSETS
(MDBI/ISR)
WHERE KNOWN)
Investment Bridges or roads—not
Yes Yes No Yes (1998)
corporation insured
Airports Authority Yes Yes One building only Yes (2012) Runway—not insured
Te Aponga Uria O
Transmission lines—
Tumu (Electricity Yes Yes No Yes (2013)
not insured
provider)
Bank of Cook Islands Yes Yes Yes Yes (2013) Not applicable
Ports Authority Yes Yes No Yes (2013) Wharf—not insured
Source: SOE senior employees and insurance industry members.
exposures. The FSC advised that it did not not always adhered to for residential properties,
undertake the detailed analysis of the local insurer’s and that these properties could not obtain cyclone
reinsurance program and property accumulation insurance without upgrades.
that would determine if these are adequate for
the probable maximum loss (PML) within the Cook Insurers have taken proactive steps to ensure
Islands. The FSC also advised they did not check compliance with the cyclone building standard
the number of reinstatements available under the by requiring engineering certificates for insured
catastrophe reinsurance program. properties, rather than relying on government
enforcement of the building code.
Building Controls and Standards
The legal basis for all construction in the Cook
///
Financial Security of Onshore Insurers
Islands is the Building Controls and Standards
Tower Insurance Cook Islands Limited is a wholly
Act (1991) and the building code. According to
owned subsidiary of Tower Insurance Limited, a
///
a local project manager and engineer in Rarotonga
New Zealand–registered company listed on the
who undertook cyclone inspections for insurers,
most commercial and government buildings New Zealand and Australian stock exchanges. As
constructed after 1991 are in accordance with the a subsidiary whose parent company has a security
code and the wind loads for cyclones. This suggests rating of A- (excellent),1 Tower Cook Islands is
that the building code is being followed for not required to provide additional security in
commercial structures. The project manager also accordance with the New Zealand Insurance
Section
advised that, based on inspections, many houses Prudential Supervision Act (2010).
were not constructed to meet the wind loads in
08 the code. This suggests that the building code is
THE COOK ISLANDS PCRAFI 39
Financial Security of Known
their assets revalued on average every three years,
Offshore Insurers whereas the CIIC relies on an asset register that
uses property valuations from 1998. This practice
The main offshore insurer used in the market is generates a risk of underinsurance. Insurance
Lloyd’s, which is regulated by the UK Financial professionals recommend that individual buildings
Conduct Authority and the Prudential Regulation should be revalued at best every three years and
Authority under the Financial Services and Markets certainly no longer than five years apart. CIIC
Act (2000). As of August 2013, Lloyd’s had should consider engaging an independent valuer
confirmed security ratings of A (excellent) from A. to provide updated valuations as soon as possible.
M. Best and A+ (strong) from Fitch Ratings and CIIC has made a decision not to insure any
Standard & Poor’s. property under NZ$50,000 in value.
The New India Insurance Company Limited is used The provision of cyclone insurance requires an
///
as a coinsurer on some local property insurance engineer’s certificate to verify that properties
programs. It is registered in India and operates comply with the building code, and it is often
branches in New Zealand, Fiji, and London. Its expensive. As a result the majority of government
///
financial strength rating, issued by A. M. Best in and SOE assets are not insured for the main
January 2013, is A- (excellent). catastrophic peril in the Cook Islands.
The insurance broker used for SOE programs is
Insurance of Public Assets
Willis New Zealand; the program uses various
insurers, including Tower. Findings on existing
Insurance of government properties is
///
property insurance arrangements for SOEs are
arranged either by Cook Islands Investment summarized in table 3.
Corporation (CIIC) or by the individual public
authorities, with many policies excluding Government infrastructure assets are not
///
the tropical cyclone peril. CIIC manages the
///
insured in the Cook Islands, due either to
///
government insurance program, although some property exclusions under existing market
public authorities—i.e., SOEs—make their own insurance policy wordings or to high premium
independent arrangements. As a result SOEs have cost. Uninsured property includes wharves,
Photo Credit
/// ///
Phillip Capper /Flickr b
40 PCRAFI THE COOK ISLANDS
bridges, roads, power transmission and distribution in part be linked to the uncoordinated approach
lines, and airport runways (see table 3). toward an asset register.
With the passage of the Captive Insurance
///
Act (2013), the Cook Islands government
can consider setting up of a captive insurer, ///
Past Catastrophe Events
as a subsidiary of CIIC, to act as an alternative The major reported damaging cyclones within the
risk financing facility for property assets. A Cook Islands have been Cyclone Sally (1987) and
feasibility study would be necessary to explore this Cyclone Pat (2011).
option, taking into account the volume of risk to
transfer and the consequent economics, capital, Damage from Cyclone Sally was estimated at
captive management, claims management, and NZ$30 million (US$24.6 million) in 1987 prices (Fiji
reinsurance. This option has some advantages for Meteorological Service 1987) across all islands in
the government and SOEs, such as the possibility the group, but the cyclone was reported to be at
of wider coverage, the inclusion of infrastructure its strongest when passing by Rarotonga (the most
assets in a program, and premium savings from risk populated island in the group and the government
pooling. The captive would need to reinsure the and commercial center). The main non-life insurer
total accumulated catastrophe exposures once a at the time, Cook Islands Insurance Limited, is
pre-agreed upon level was reached that exceeded reported as incurring claims that exceeded NZ$4
its capacity. million (US$3.3 million) in value on a premium
base of NZ$400,000 (US$328,000) (Crocombe
The Cook Islands government has been
///
1992). This would suggest an insurance
included in the Pacific Catastrophe Risk penetration of around 13 percent at that time.
Insurance Pilot since 2013. The government
///
should include this program in any disaster risk Damage from Cyclone Pat, which impacted
financing and insurance strategy that is developed, Aitutaki, was estimated at NZ$9.5 million (US$7.8
and should also provide input on ways to expand million); there was damage to 436 homes, and 68
the program. homes were totally destroyed. Tower advised that
there were minimal insured losses from Cyclone
There is no up-to-date government central
///
Pat because most damaged properties on Aitutaki
asset register for public assets. While the CIIC
///
were not insured for cyclone. This suggests
has an asset register, it uses 1998 data. Some a current low property insurance penetration
government departments, public authorities, and on Aitutaki.
state-owned enterprises hold asset registers, but
these are not looked at collectively. The result is a There have been no reported earthquakes or
piecemeal approach to insuring assets. Should a tsunami events in the Cook Islands.
centralized asset register be developed, there may
be potential for premium reduction.
The government keeps no centralized register
///
of insurance arrangements for public assets
///
Section that have been made by individual government
departments, public authorities, or SOEs. This may
08
THE COOK ISLANDS PCRAFI 41
Options for Consideration Endnotes
Recommendation 1: Develop an insurance
///
1 A. M. Best rating, July 26, 2013.
program for key public assets to be included
in a broader disaster risk financing and
insurance strategy. This approach would include
///
References
establishment of a centralized asset register with
up-to-date valuations in conjunction with the Cook Crocombe, R. G. 1992. Pacific Neighbours: New Zealand’s Rela-
Islands Investment Corporation, assessment of tions with Other Pacific Countries. Christchurch, New Zealand:
MacMillan Brown Centre for Pacific Studies and Institute for
probable losses, and a review of existing indemnity
Pacific Studies.
insurance to ensure that the major perils of
cyclone and sea surge are included, and that the Fiji Meteorological Service. 1987. “Tropical Cyclone Report 87/5:
government and SOEs are getting the best available Tropical Cyclone Sally, 26 Dec 1986–5 Jan 1987.” Fiji Meteoro-
logical Service, Nadi, Fiji.
terms and conditions for the premiums paid.
IAIS (International Association of Insurance Supervisors). 2012.
Recommendation 2: Develop a program
///
Global Insurance Market Report. 2012 edition. http://iaisweb.
of technical development for the Financial org/index.cfm?event=getPage&nodeId=25308.
Supervisory Commission and consider
PCRAFI (Pacific Catastrophe Risk Assessment and Financing Initia-
applying for membership in the International
tive). 2011. “Country Risk Profile: Cook Islands.” September.
Association of Insurance Supervisors. This///
http://pacris.sopac.org.
program should focus on building the capacity
of those responsible for risk-based supervision. Reserve Bank of Fiji. Insurance Annual Report 2012. http://www.
rbf.gov.fj/Publications/Publications/Insurance-Annual-Reports.
Membership in IAIS would allow the Cook Islands
aspx.
to access international best practice information on
regulation and supervision of insurance companies. Swiss Re. 2012. “Natural Catastrophes and Man-Made Disasters
in 2011.” Sigma 2/2012. http://www.swissre.com/sigma/.
———. 2013. “Natural Catastrophes and Man-Made Disasters in
2012.” Sigma 2/2013. http://www.swissre.com/sigma/.
World Bank. 1999. “Using Capital Markets to Develop Private
Catastrophe Insurance.” Viewpoint Note 197, World Bank,
Washington, DC.Glossary
Section
08
42 PCRAFI THE COOK ISLANDS
Someone who acts for the insurance company in arranging insurance contracts. There are two main
Agent types of agents: tied agents, who act for one insurer only, and general agents, who act for multiple
insurance companies.
Someone who acts as an agent for the insured in arranging an insurance or reinsurance program
Broker
with a provider of capacity.
The ability of an insurance company to provide insurance protection to clients, which is limited by
Capacity
its own financial strength and the reinsurance protection it has in place.
An insurance company wholly owned by a company or entity that insures the risks of the parent
Captive insurer
entity and subsidiaries.
Insurance that reimburses individuals or entities for loss or damage to a financial position as close
Indemnity insurance as possible to the position they were in prior to the event, in the context of the financial terms of
the coverage (such as deductible/excess and limit).
Intermediaries The general term given to insurance agents and brokers.
The amount that an insurance company retains on a reinsurance contract and in particular an
Net retention
excess of loss of contract.
A type of insurance that is triggered by the occurrence of a specific measured hazard event, such
Parametric insurance
as a certain magnitude of earthquake or category of cyclone.
Probable maximum loss
The maximum value of a claim from a large or catastrophe event. May also be called MPL.
(PML)
The insurance of physical assets such as buildings, plant and equipment, stock, and machinery.
Property insurance The products used for this insurance are variously named as fire and perils, commercial or business
package, industrial special risks, or material damage insurance.
A risk transfer method used by insurance companies to transfer part of a single large risk or an
accumulation of similar risks and so increase their capacity. Reinsurance helps to smooth the
Reinsurance
extreme results and effects of specific perils (such as catastrophe events) and therefore to reduce
the volatility of an insurance portfolio.
The extent by which an insurer’s assets exceed its liabilities. Minimum statutory solvency
Section Solvency margin
requirements are normally included in insurance acts or regulations.
08
THE COOK ISLANDS PCRAFI 43
Annex 4
Country Risk Profile
Section
09
PACIFIC CATASTROPHE RISK
ASSESSMENT AND FINANCING
INITIATIVE
COOK
ISLANDS
SEPTEMBER 2011
COUNTRY RISK PROFILE: COOK ISLANDS
The Cook Islands are expected to incur, on average, about
5 million USD per year in losses due to earthquakes and
tropical cyclones. In the next 50 years, the Cook Islands
have a 50% chance of experiencing a loss exceeding 75
million USD and casualties larger than 130 people, and a
10% chance of experiencing a loss exceeding 270 million
USD and casualties larger than 200 people.
BETTER RISK INFORMATION FOR SMARTER INVESTMENTS
COUNTRY RISK PROFILE: COOK ISLANDS
POPULATION, BUILDINGS, INFRASTRUCTURE AND 166° W 164° W 162° W 160° W 158° W
Aitu- 012 4
0 150 300 600 Arutanga
8° S
CROPS EXPOSED TO NATURAL PERILS taki Kilometers
Kilometers
An extensive study has been conducted to assemble a
10° S
comprehensive inventory of population and properties at Atiu
risk. Properties include residential, commercial, public and Mangaia
12° S
012 4
industrial buildings; infrastructure assets such as major ports,
airports, power plants, bridges, and roads; and major crops, 0 1 2 3
14° S
such as coconut, palm oil, taro and many others. Buildings
Avarua
Rarotonga
Residential Public
16° S
Commercial Other
TABLE 1: Industrial
Summary of Exposure in Cook Islands (2010)
18° S
Atiu
General Information: Aitutaki
20° S
Total Population: 19,800 Rarotonga
Mangaia
GDP Per Capita (USD): 12,330
22° S
Total GDP (million USD): 244.1 Cook Islands 0 2 4 8
Asset Counts:
Figure 1: Building locations.
Residential Buildings: 8,357
166° W 164° W 162° W 160° W 158° W
Public Buildings: 503 0 150 300 600 Aitu- 012 4
Arutanga
8° S
taki Kilometers
Commercial, Industrial, and Other Buildings: 1,742 10° S
Kilometers
All Buildings: 10,602 Atiu
Hectares of Major Crops: 6,390 Mangaia
12° S
012 4
Cost of Replacing Assets (million USD):
0 1 2 3
14° S
Buildings: 1,296 Building Replacement Cost Density
Infrastructure: 118 (million USD / km^2) Avarua
Rarotonga
16° S
0 - 0.5 1-5 15 - 20
Crops: 8 0.5 - 0.75 5 - 10 20 - 30
0.75 - 1.0 10 - 15
Total: 1,422
18° S
Government Revenue and Expenditure: Atiu
Aitutaki
20° S
Total Government Revenue Rarotonga
Mangaia
(Million USD): 86.9
22° S
(% GDP): 35.6%
Cook Islands 0 2 4 8
Total Government Expenditure
Figure 2: Building replacement cost density by district.
(Million USD): 77.9
(% GDP): 31.9% 166° W 164° W 162° W 160° W 158° W
0 150 300 600 Aitu- 012 4
Arutanga
8° S
taki Kilometers
1
Data assembled from various references including WB, ADB, IMF and The Kilometers
Secretariat of the Pacific Community (SPC).
10° S
2
The projected 2010 population was trended from the 2006 census using Atiu
estimated growth rates provided by SPC. Land Cover / Land Use Mangaia
12° S
Cassava Other Plantation 012 4
Coconut Crops Rice
Table 1 summarizes population and the inventory of buildings, Coconut Forest Sand Bay 0 1 2 3
14° S
Grass Land Forest
infrastructure assets, and major crops (or “exposure”) at
risk as well as key economic values for the Cook Islands. It is
Nut Tree
Open Land
Settlement
Sugarcane
Avarua
Rarotonga
16° S
Orchard Taro
estimated that the replacement value of all the assets in the Other Unknown Crops
Palm Oil Water
Cook Islands is 1.4 billion USD of which about 91% represents
18° S
buildings and 8% represents infrastructure. Atiu
Aitutaki
20° S
Rarotonga
Figures 1 and 2 illustrate the building exposure location and Mangaia
replacement cost distribution, respectively. The footprints of
22° S
almost 10,000 of the approximately 11,000 buildings shown in Cook Islands 0 2 4 8
Figure 1 were digitized from high-resolution satellite imagery.
Figure 3: Land cover/land use map.
More than 5,000 of such buildings, almost all in the main
2
September 2011
COUNTRY RISK PROFILE: COOK ISLANDS
island of Rarotonga and the rest in the island of Aitutaki, were The Cook Islands are situated in a relatively quiet seismic area,
also field surveyed and photographed by a team of inspectors but is surrounded by the Pacific “ring of fire,” which aligns
deployed for this purpose. Figure 3 displays the land cover/ with the boundaries of the tectonic plates. These boundaries
land use map that includes the location of major crops. The are extremely active seismic zones capable of generating large
data utilized for these exhibits was assembled, organized earthquakes and, in some cases, major tsunamis that can
and, when unavailable, produced in this study. travel great distances. No significant earthquakes have been
reported in recent times. However, in 1909, a tsunami with
TROPICAL CYCLONE AND EARTHQUAKE HAZARDS waves up to three meters damaged bridges and crop fields in
IN COOK ISLANDS Rarotonga. Figure 5 shows that the Cook Islands have a 40%
The Pacific islands region is prone to natural hazards. The chance in the next 50 years of experiencing, at least once, very
Cook Islands are located south of the equator in an area weak levels of ground shaking. These levels of shaking are not
known for the frequent occurrence of tropical cyclones with expected to cause any damage to well-engineered buildings
damaging winds, rains and storm surge between the months and infrastructure assets.
of October and May. In the South Pacific region from the
166° W 164° W 162° W 160° W 158° W
equator to New Zealand in latitude and from Indonesia to 0 150 300 600 Aitu- 012 4
Arutanga
8° S
east of Hawaii in longitude, almost 1,000 tropical cyclones taki Kilometers
Kilometers
with hurricane-force winds spawned in the last 60 years, with
10° S
Atiu
an average of about 16 tropical storms each year. The Cook
Mangaia
Islands affected by devastating cyclones multiple times in
12° S
012 4
the last few decades. For example, in 1997, tropical cyclones
0 1 2 3
Martin and Pam caused 22 fatalities, 19 of which were on
14° S
Manihiki Atoll alone, where wind and storm surge destroyed Avarua
Rarotonga
16° S
essentially every building on the island, incurring about 48
million USD in losses that crippled the local economy. More
18° S
recently, in 2010, tropical cyclone Pat wrought widespread Atiu
damage on the island of Aitutaki. Figure 4 shows the levels Aitutaki
20° S
of wind speed due to tropical cyclones that have about a 40% Rarotonga
Mangaia
chance to be exceeded at least once in the next 50 years (100-
22° S
year mean return period). These wind speeds, if they were to
occur, are capable of generating severe damage to buildings,
Cook Islands 0 2 4 8
Perceived Shaking Not Felt Weak Light Moderate Strong Very Strong Severe Violent Extreme
infrastructure and crops with consequent large economic Moderate/ Very
Potential Damage none none none Very light light Moderate Heavy Heavy Heavy
losses.
Peak ACC. (%g) <0.17 0.17-1.4 1.4-4.0 4.0-9 9-17 17-32 32-61 61-114 >114
Peak Vel. (cm/s) <0.12 0.12-1.1 1.1-3.4 3.4-8 8-16 16-31 31-59 59-115 >115
166° W 164° W 162° W 160° W 158° W Instrumental Intensity I II-III IV V VI VII VIII IX X+
0 150 300 600 Aitu- 012 4
Arutanga
8° S
taki Kilometers Scale based upon Wald. et al: 1999
Kilometers
Figure 5: Peak horizontal acceleration of the ground (Note: 1g is equal to the
10° S
Atiu acceleration of gravity) that has about a 40% chance to be exceeded at least once in
Mangaia the next 50 years. (100-year mean return period).
12° S
012 4
0 1 2 3 RISK ANALYSIS RESULTS
14° S
To estimate the risk profile for the Cook Islands posed by
Avarua
Rarotonga
tropical cyclones and earthquakes, a simulation model of
16° S
potential storms and earthquakes that may affect the country
in the future was constructed. This model, based on historical
18° S
Atiu data, simulates more than 400,000 tropical cyclones and
Aitutaki
20° S
Rarotonga about 7.6 million earthquakes, grouped in 10,000 potential
Mangaia realizations of the next year’s activity in the entire Pacific
22° S
Basin. The catalog of simulated earthquakes also includes
Cook Islands 0 2 4 8
large magnitude events in South and North America, Japan
and the Philippines, which could generate tsunamis that may
0 25 50 75 100 125 150 175 200
affect the Cook Islands’ shores.
Maximum Wind Speed
Figure 4: Maximum 1-minute sustained wind speed (in miles per hour) with a 40%
chance to be exceeded at least once in the next 50 years. (100-year mean return
period).
3
September 2011
COUNTRY RISK PROFILE: COOK ISLANDS
The country’s earthquake and tropical cyclone risk profiles 166° W 164° W 162° W 160° W 158° W
Aitu- 012 4
0 150 300 600 Arutanga
8° S
are derived from an estimation of the direct losses to taki Kilometers
Kilometers
buildings, infrastructure assets and major crops that are
10° S
caused by all the simulated potential future events. The Atiu
Mangaia
direct losses include the cost of repairing or replacing the
12° S
012 4
damaged assets, but do not include other losses such as
0 1 2 3
contents losses, business interruption losses and losses to
14° S
Total Average Annual Loss
primary industries other than agriculture. The direct losses (million USD) Avarua
Rarotonga
16° S
0 - 0.05 0.2 - 0.3 0.5 - 0.6
for tropical cyclones are caused by wind and flooding due to 0.05 - 0.1 0.3 - 0.4 0.6 - 0.7
rain and storm surge, while losses for earthquakes are caused 0.1 - 0.2 0.4 - 0.5
18° S
by ground shaking and tsunami inundation. After assessing Atiu
Aitutaki
the cost of repairing or rebuilding the damaged assets due
20° S
Rarotonga
to the impact of all the simulated potential future events, it Mangaia
is possible to estimate in a probabilistic sense the severity of
22° S
losses for future catastrophes. Cook Islands 0 2 4 8
Figure 7: Contribution from the different districts to the average annual loss for
The simulations of possible next-year tropical cyclone and tropical cyclone and earthquake (ground shaking and tsunami).
earthquake activity show that some years will see no storms
166° W 164° W 162° W 160° W 158° W
or earthquakes affecting the Cook Islands, while other years 0 150 300 600 Aitu- 012 4
Arutanga
8° S
may see one or more events affecting the islands, similar to taki Kilometers
Kilometers
what has happened historically. The annual losses averaged 10° S
Atiu
over the many realizations of next-year activity are shown in
Mangaia
Figure 6 separately for tropical cyclone and for earthquake
12° S
012 4
and tsunami, while the contributions to the average annual
0 1 2 3
14° S
loss from the different electoral boundaries are displayed in AAL / Asset Value
absolute terms in Figure 7 and normalized by the total asset 0% - 0.1% 0.4% - 0.45% Avarua
Rarotonga
0.1% - 0.2% 0.45% - 0.5%
16° S
values in each electoral boundary in Figure 8. Figure 8 shows 0.2% - 0.3% 0.5% - 1%
how the relative risk varies by electoral boundary across the 0.3% - 0.4% 1% - 2.6%
18° S
country. Atiu
Aitutaki
Tropical Cyclone Earthquake
20° S
Average Annual Loss = 4.9 million USD Average Annual Loss = 0.001 million USD Rarotonga
9.6%0.9% 1.5% 0.9% Mangaia
22° S
Buildings
Cash Crops
Buildings
Cash Crops
Cook Islands 0 2 4 8
Infrastructure Infrastructure
89.5%
Figure 8: Contribution from the different districts to the tropical cyclone and
97.6%
earthquake (ground shaking and tsunami) average annual loss divided by the
replacement cost of the assets in each district.
Figure 6: Average annual loss due to tropical cyclones and earthquakes (ground
shaking and tsunami) and its contribution from the three types of assets. Tropical Cyclone Earthquake Ground Motion Tsunami
Average Annual Loss (million USD)
100
The same risk assessment carried out for the Cook Islands 10
8
was also performed for the 14 other Pacific Island Countries. 80 6
The values of the average annual loss of the Cook Islands and 4
2
of the other 14 countries are compared in Figure 9. 60 0
In addition to estimating average risk per calendar year, 40
another way of assessing risk is to examine large and
rather infrequent, but possible, future tropical cyclone and
20
earthquake losses. Table 2 summarizes the risk profile for the
Cook Islands in terms of both direct losses and emergency
0
losses. The former are the expenditures needed to repair
or replace the damaged assets while the latter are the
expenditures that the Cook Islands government may need
to incur in the aftermath of a natural catastrophe to provide
necessary relief and conduct activities such as debris removal,
4
Figure 9: Average annual loss for all the 15 Pacific Island Countries
considered in this study.
September 2011
COUNTRY RISK PROFILE: COOK ISLANDS
setting up shelters for homeless or supplying medicine and In addition to causing damage and losses to the built
food. The emergency losses are estimated as a percentage environment and crops, future earthquakes and tropical
of the direct losses. cyclones will also have an impact on population. The same
probabilistic procedure described above for losses has been
Table 2 includes the losses that are expected to be exceeded, adopted to estimate the likelihood that different levels of
on average, once every 50, 100, and 250 years. For example, casualties (i.e., fatalities and injuries) may result from the
a tropical cyclone loss exceeding 103 million USD, which future occurrence of these events. As shown in Table 2, our
is equivalent to about 42% of the Cook Islands’ GDP, is to model estimates, for example, that there is a 40% chance
be expected on average once every 100 years. In the Cook in the next fifty years (100 year mean return period) that
Islands, tropical cyclone losses are clearly prominent in the one or more events in a calendar year will cause casualties
risk profile although earthquakes and earthquake-induced exceeding 145 people in the Cook Islands. Events causing
tsunamis are also capable of generating losses. 300 or more casualties are also possible but have much lower
likelihood of occurring.
A more complete picture of the risk can be found in Figure
10, which shows the mean return period of direct losses in TABLE 2: Estimated Losses and Casualties Caused by Natural Perils
million USD generated by earthquake, tsunami and tropical Mean Return Period (years) AAL 50 100 250
cyclones combined. The 50-, 100-, and 250-year mean return
Risk Profile: Tropical Cyclone
period losses in Table 2 can also be determined from the
curves in this figure. The direct losses are expressed both in Direct Losses
absolute terms and as a percent of the national GDP. (Million USD) 4.9 56.8 103.0 198.1
(% GDP) 2.0% 23.3% 42.2% 81.2%
400 Emergency Losses
TC+EQ
350 (Million USD) 1.1 13.1 23.6 45.5
Direct Losses (million USD)
TC
300
EQ (% of total government 1.4% 16.8% 30.3% 58.4%
250 expenditures)
200
Casualties 9 112 145 183
150
100
Risk Profile: Earthquake and Tsunami
50 Direct Losses
0 (Million USD) 0.0 0.0 0.0 0.0
0 100 200 300 400 500 600 700 800 900 1,000
Mean Return Period (years) (% GDP) 0.0% 0.0% 0.0% 0.0%
Emergency Losses
150%
TC+EQ (Million USD) 0.0 0.0 0.0 0.0
125% TC (% of total government 0.0% 0.0% 0.0% 0.0%
Direct Losses (% GDP)
100% EQ expenditures)
75%
Casualties 0 0 0 0
Risk Profile: Tropical Cyclone, Earthquake, and Tsunami
50%
Direct Losses
25%
(Million USD) 4.9 56.8 103.0 198.1
0%
0 100 200 300 400 500 600 700 800 900 1,000 (% GDP) 2.0% 23.3% 42.2% 81.2%
Mean Return Period (years)
Emergency Losses
Figure 10: Direct losses (in absolute terms and normalized by GDP) caused by either (Million USD) 1.1 13.1 23.6 45.5
tropical storms or earthquakes that are expected to be exceeded, on average, once (% of total government 1.4% 16.8% 30.3% 58.4%
in the time period indicated. expenditures)
Casualties 9 112 145 183
Casualties include fatalities and injuries.
1
5
September 2011
PCRAFI 2015
Country Note
THE COOK ISLANDS
This note on the Cook Islands forms part of a series of country Disaster Risk Finance and Insurance (DRFI)
notes that were developed to build understanding of the existing DRFI tools in use in each country and
to identify gaps future engagements in DRFI that could further improve financial resilience. These notes
were developed as part of the technical assistance provided to countries under the Pacific DRFI program
jointly implemented by the World Bank and the Secretariat of the Pacific Community financed by the
Government of Japan. The technical assistance builds on the underlying principles of the three-tiered di-
saster risk financing strategy and focuses on three core aspects: (i) the development of a public financial
management strategy for natural disasters, recognizing the need for ex-ante and ex-post financial tools;
(ii) the post-disaster budget execution process, to ensure that funds can be accessed and disbursed easily
post-disaster; and (iii) the insurance of key public assets, to resource the much larger funding require-
ments of recovery and reconstruction needs. The Pacific DRFI Program is one of the many applications
of PCRAFI. It is designed to increase the financial resilience of PICs by improving their capacity to meet
post-disaster financing needs without compromising their fiscal balance.
The Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) is a joint initiative of SOPAC/SPC, World Bank, and the Asian
Development Bank with the financial support of the Government of Japan, the Global Facility for Disaster Reduction and Recovery
(GFDRR) and the ACP-EU Natural Disaster Risk Reduction Programme, and technical support from AIR Worldwide, New Zealand GNS
Science, Geoscience Australia, Pacific Disaster Center (PDC), OpenGeo and GFDRR Labs.