Tonga opts to include drought as it increases PCRIC coverage

By Henry Gale

July 16 - (The Insurer) - The government of Tonga has committed to renew its parametric catastrophe insurance policy with the Pacific Catastrophe Risk Insurance Company, increasing its premium contribution and adding coverage for drought risk, the regional risk pool said.

Tonga's government plans to increase its premium contribution from $125,000 to $1 million for 2025/26, PCRIC said, which would provide an estimated $17 million of coverage.

While Tonga currently has parametric coverage from PCRIC for tropical cyclone, earthquake and tsunami risks, the renewed policy is also expected to include drought risks, PCRIC said.

PCRIC has not covered drought risks before, but it has been working to develop a product for the peril for some time. It said earlier this year that it expected its first drought policies to be signed in 2025.

At previous renewals, PCRIC policies have incepted on November 1, so this is when the changes to Tonga's policy are likely to occur.

PCRIC's risk pool grew to $52.75 million in coverage limit at its renewals last November, when it also redesigned its policy structures in partnership with WTW, Reask, JBA Risk Management and Temblor.