The Fijian government has committed to alleviating the financial burden of natural disasters on its national budgets by finalising its inaugural sovereign parametric insurance cover.

The arrangement was solidified through the signing of a letter in Marrakech, Morocco. Under this proposition, the Fijian government will be insured by the Pacific Catastrophe Risk Insurance Company (PCRIC), of which it is a member.

To secure this parametric insurance, the government had initially allocated FJ$2.5 million, with plans to escalate this figure to FJ$7.5 million over the next two years, as outlined in its 2023-2024 budget estimates.

The specific insurance policy, known as Fiji’s “Cat-In-A-Circle” policy provided by PCRIC, is tailored to trigger a payout within a span of 10 to 20 days following a tropical cyclone.

Additionally, Fiji has an existing concessional loan agreement of JPY50 billion (FJ$760 million) with the government of Japan, established by the preceding government. This agreement serves as a standby loan dedicated to disaster recovery and rehabilitation, to be disbursed through the Japan International Cooperation Agency (JICA) upon the declaration of a state of disaster.

“The reality is that we now must fork out more money from government’s coffers towards responding in times of emergencies, building climate resilient infrastructure and relocation of population affected by rising sea levels and loss of arable lands,” said Biman Prasad,Fiji deputy prime minister and minister of finance.

In an earlier development, Lloyd's has joined forces with the UNCDF in an effort to enhance insurance accessibility for countries vulnerable to climate change impacts, with an initial focus on Fiji and Pacific island nations.

What are your thoughts on this story? Please feel free to share your comments below.