Jamaica is working to close its protection gap with increased re/insurance cover purchase, after government estimates have shown that without further protection, a storm the magnitude of the 1988 Caribbean Hurricane Gilbert would cause economic devastation that would set the country years back in its development goals.
The government is collaborating with the World Bank and general insurers to create an improved disaster prevention plan through the Disaster Risk Financing Technical Assistance Programme, (DRFTA), and the Ministry of Finance said it would release a new disaster protection strategy in the “next few months,” the Jamaica gleaner reported.
The Jamaican fiscal policy report for the 2017-2018 period estimated that a hurricane with a similar ferocity to Hurricane Gilbert would cost around $1.3 billion – a figure higher than what the government has currently budgeted for in its disaster response.
Ministry of Finance’s fiscal policy said a natural disaster of this magnitude “would be a significant setback to the macroeconomic stability of Jamaica.”
The Jamaica Gleaner said the fiscal policy paper shows the National Disaster Fund – the country’s main finance disaster recovery budget – is starkly undercapitalised at $2 million as of March 2015-16.
Jamaica’s natural disaster programme is the CCRIF – the Caribbean Catastrophe Risk Insurance Facility – but the scheme’s payout capacity is limited – its largest payout to date was $20 million to Haiti last year.
In addition to working towards an improved disaster prevention plan with the DRFTA, The World Bank gave the Jamaican government a $30-million loan as part of the Disaster Vulnerability Reduction Project under a six-year disaster-mitigation programme.
According to DRFTA’s disaster risk profile for Jamaica, the country’s annual loss related to hurricanes is $67.3 million, or 0.5 per cent of GDP, while for earthquakes it is US$36 million or 0.3 per cent of GDP.
“Hence, this means that, for example, if Hurricane Gilbert that devastated Jamaica in 1988 were to happen now, it would cause a loss of US$1.3 billion, amounting to 9.6 per cent of GDP,” the Jamaica Gleaner reported.
And the Jamaican DRFTA programme is just one of many similar initiatives being rolled out by emerging markets as governments collaborate with the World Bank and other international bodies to develop schemes for improved disaster resilience; all of which mean more opportunities for reinsurance cover will awaken as primary insurers compete to offer the most affordable solutions to emerging markets.
The World Bank also recently highlighted Latin America, in particular Mexico, as a growing market with sophisticated government schemes enabling improved international risk transfer.