Pacific Island Countries (PICs) are among the most vulnerable countries in the world, threatened by the risk of tropical cyclones, earthquakes and tsunamis that cause fiscal shocks and humanitarian crises. On February 12, 2018, Tropical Cyclone Gita struck Tonga, a Category 4 event that impacted nearly 50% of its population, destroyed 1,200 homes and caused damage estimated at US$61.7 million. At the onset of a natural hazard event, governments require rapid response, disaster risk financing instruments that provide immediate liquidity to cover emergency response and maintain basic public services. However, access to short-term liquidity is often constrained due to the small size of island economies, which in turn restricts their borrowing capacity and access to financial markets.
The PCRAFI Program – Phase II: Furthering Disaster Risk Finance in the Pacific – scales-up regional collaboration to increase the financial resilience of Pacific Island Countries (PICs) against natural hazards and their capacity to meet post-disaster funding needs. In 2016, more than US$40 million in grants was mobilized for PICs through the G7 initiative on climate risk insurance – InsuResilience Global Partnership2 – to establish the PCRAFI Multi-Donor Trust Fund (MDTF) with generous contributions from Germany, Japan, the United Kingdom and the United States.