Premier in catastrophe fund talks
By Scott Neil
The World Bank and Caribbean nations, along with Bermuda, have taken a further step towards the creation of a new fund to insure island nations against hurricanes and other natural disasters.
Representatives from the Caribbean countries, along with Premier Ewart Brown, gathered in Washington DC yesterday to discuss the bank’s first programme to offer the insurance, which would provide countries with immediate liquidity in the event of a natural disaster.
Each participating country can choose the level of annual premium it wishes to pay, ranging from $200,000 to $4 million, which will give a coverage ranging from $10 million to $50million.
The money would be paid to an affected participating country immediately after it had been hit by a hurricane or earthquake.
Finance Minister Paula Cox announced in the Budget that Bermuda would enter at a premium level of $500,000 a year and pay two years of premiums and a joining fee of $500,000, making the Island’s initial outlay towards the scheme $1.5 million.
Bermuda attended a meeting in Kingston, Jamaica, last April that set the foundation for the facility, and was also present at a follow up meeting in Barbados in October 2006.
Ms Cox indicated at a gathering of business leaders in Hamilton last week that the Government would try to persuade the World Bank and the other participants to headquarter the catastrophe fund in Bermuda. A World Bank official has reportedly stated the fund will be registered in the Cayman Islands.
At the Washington meeting Premier Brown represented Bermuda in the ongoing discussions.
The International Development Association, the bank’s low-interest lending arm, has pledged $27 million in funding. But another $30 million is needed to get the programme going.
The World Bank hopes to collect some $50 million from donors, including the European Union, UK, Japan, France and Canada, who sent representatives to the conference, which was presided over by World Bank president Paul Wolfowitz.
The bank aims to make the insurance available for the upcoming hurricane season, which starts in June.
The programme will serve as a model that could be used in other regions with small countries, said Caroline Anstey, the World Bank’s director of Caribbean country management unit.
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) will allow stricken nations to begin disaster response right away with the guarantee of access to enough money to fund emergency measures.
Until now, it has usually taken months after a catastrophe to raise emergency funds from donor countries. Since 1979, hurricanes have caused more than $16 billion in losses in Caribbean nations, according to World Bank data.
A report by The Intergovernmental Panel on Climate Change warned this month that typhoons and hurricanes would likely intensify in strength due to global warming attributed to climate change.
In 2004, Hurricane Ivan affected eight Caribbean countries, including Granada, whose losses were estimated at $800 million, about twice the size of the island’s economy.
Participating countries in the new programme will be from the Caribbean Community and Common Market (CARICOM) including the Bahamas, Barbados, Grenada, Haiti, Jamaica, Bermuda, Montserrat, St. Lucia, Belize, Trinidad and Tobago, St Kitts and Nevis, Dominica, British Virgin Islands, Anguilla, and the Cayman Islands.
“The facility will allow CARICOM governments to purchase coverage akin to business interruption insurance that would provide them with an immediate cash payment after the occurrence of a major earthquake or the passing of a hurricane,” the World Bank said.
The insurance will be limited to hurricane and earthquake coverage, the bank said, estimating that major hurricanes can be expected to hit the Caribbean once every two-and-a-half years.
To participate in the insurance plan, countries will be required to pay a one-off non-refundable entry fee and an annual premium, which will vary according to a country’s individual risk profile.
Francis Ghesquiere, a senior World Bank urban specialist, said by pooling their risk countries will be able to reduce individual premiums by some 40 percent.
He said the facility will be established as an independent entity registered in the Cayman Islands and managed by local Caribbean companies.
But it won’t solve all problems, said Mr Ghesquiere: “Countries still need to engage in mitigation and improve territorial building codes and emergency services.”
He said the facility would at first be restricted to governments but could over time be expanded to domestic insurers and possibly other parts of the world.
Catastrophe fund talks
