Insurance Helpline | Some insurance lessons from Hurricane Matthew

This newspaper's editorial said last Wednesday that "despite the nearly 900 deaths in Haiti, the emerging story of Hurricane Matthew ... is perhaps North Carolina in the United States. It is one to which Jamaica should pay attention and learn from".

I totally disagree. There is much to be learnt from what Haiti did and did not do.

The human cost of the deaths and destruction caused by the hurricane in the US would have been much worse were it not for the warning systems that were put in place. The editorial concluded that: "Jamaica has had a problem of people in flood-prone areas not heeding storm warnings and responding to disaster-preparedness messages (and) that culture can be changed by continuing education and reinforcing information ... from building and adhering to systems, rather than depending on personalities."

Jamaica's problem like Haiti's is far more complex than simply listening to storm warnings and responding to disaster-preparedness messages. Making structures more hazard-resistant, developing and enforcing proper building regulations and land-use restrictions are among "some of the cost-effective means of reducing the toll on life and property."

Today's article will share information from another neighbour. This one is also to the north The Bahamas. That group of islands was also seriously affected by Hurricane Matthew, although there was no loss of lives. It will also look at some of the things Jamaica should be doing to minimise the effects of future disasters that will result in loss of lives and cause disruption in our very fragile economy.

SEVEN BASIC FACTS

1. Hurricanes, earthquakes and floods account for the most deaths and financial damage in the Caribbean region. The frequency of these events has, according to one report "Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions", increased during the last century. It has accelerated more recently. During 1970-99, the region averaged 11.9 catastrophic events each year. The 2002 report did not discuss what effects global warming would have on the frequency and severity of future hurricanes.

2. Jamaica suffered a direct hit from Hurricane Gilbert in 1988. The economic losses from that event were estimated at US$1 billion. International assistance from donors amounted to 10 per cent of that amount or US$102.4 million, reports the "Primer on Natural Hazard Management in Integrated Regional Development Planning."

3. The primer also said preventive measures "can reduce the human tragedy and incalculable costs of lost jobs and production associated with natural disasters."

4. Six years after a devastating earthquake, Haiti has still not recovered.

5. The economic gains that have been achieved from the extended fund facility with the International Monetary Fund macroeconomic stability were described in another of this newspaper's editorials as "fragile". This is perhaps one of the reasons why the government is, according to the Jamaica Observer, proposing to continue "with insurance contracts to hedge against any sharp increases in oil prices that could impact its economic reform agenda".

6. "Only 3.8 per cent of the damage from natural catastrophes between 1985 and 1999 in Latin America and the Caribbean were insured, ranking it the last among the world," according to the 2002 report.

7. The IMF's recent advice to the Jamaican Government "to establish a financial inclusion council as part of the efforts to achieve higher economic growth by, among other things, improving financial access to affordable financial services to credit, insurance and savings, particularly for disadvantaged and low-income segments of the society" should be viewed in the context of item 6.

IMPACT ON BAHAMAS

- Damage to homes, other property and infrastructure in the islands of Andros, Grand Bahamas and New Providence was estimated by Bahamian Prime Minister Perry Christie, according to the Nassau Guardian, at US$400 million.

- The country was still in the process of recovering from Hurricane Joaquin in 2015 when Matthew occurred.

- The government is exploring two options to fund the recovery efforts. One involves floating a US$150 million bond. The other is to raise taxes. The opposition party does not support this option. The government, on the other hand, is worried about the high cost of borrowing. The PM said that "many persons see the Bahamas as a rich country which should be able to bounce back largely on its own."

LESSONS FOR JAMAICA

- There are no fairy-godmothers who will provide financial resources to fund the island's recovery efforts in the face of major catastrophes;

- Planning for and managing the risks of natural disasters involves many disciplines and should form part of the country's long-term plan much in the same way that recovery from past economic disasters are being tackled by means of how the government and its institutions operate;

- Strategies should be developed and implemented by the government in co-operation with the private sector to make commercial insurance more affordable and available to a wider cross section of the society; and

- Government should swiftly move to enact the new building regulations.

There are many things that this country can learn from studying the 2010 and 2011 New Zealand earthquakes where the private insurance market provided 80 per cent of the financial resources to fund recovery efforts.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com