Insurance Helpline | Is Jamaica among 20 riskiest nations on the planet?
Question: Jamaica is one of the 20th riskiest nations on the planet, according to a headline in another newspaper. Is the information accurate? Does this explain why the cost of perils insurance is so high? I am most interested in learning about your opinion on the subject.
R.W., Kingston 7.
INSURANCE HELPLINE: I read the article. Most of its contents were sourced from the 74-page WorldRiskReport 2015. The Institute for Environment and Human Security of the United Nations University recently released the report in Bonn, Germany.
The consequences of possible extreme natural events in 171 countries were addressed in the study. It was not until after I did a quick read of the 2014 report that I began to appreciate the context for the analyses. They deal with much more than what the report describes as the risks of natural events.
"Disasters can have devastating impacts on a country's food security not only in the short term, but also long after they have occurred," according to the two reports. "They destroy harvests, stocks, and transport routes, and, therefore, above all, the livelihoods of those depending on agriculture (and other enterprises). However, the reverse is true as well. It is not unusual for extreme natural events to turn into disasters because the population affected is particularly vulnerable due to a poor food situation. In the worst case, the combined effect of disasters and food insecurity leads to a fatal downward spiral, with the people hit slipping from one crisis into the next." The example of Haiti comes to mind.
"Whether it be an earthquake or a tsunami, a cyclone (hurricane) or floods, the risk of a natural event turning into a disaster always depends only partly on the force of the natural event itself. The living conditions of the people in the regions affected and the options available to respond quickly and to provide assistance are just as significant. Those who are prepared, who know what to do in the event of an extreme natural event, have a greater chance of survival. Countries that see natural hazards coming, that are preparing for the consequences of climate change (for example) and are providing the financial means required will be better prepared for the future."
The WorldRiskIndex is meant to give answers to four key questions: How likely is an extreme natural event, and will it affect people? How vulnerable are people to natural hazards? To what extent can societies cope with acute disasters? Is a society taking preventive measures to face natural hazards to be reckoned with in the future?
Jamaica's ranking in the index should be viewed against the background of these variables.
The index is "a mathematical model and a visualisation instrument that systematically combines exposure to extreme natural events and societal vulnerability in risk values and charts. It is based on 28 indicators enabling statements on potentially threatened areas or countries and on the social, economic and ecological conditions of societies. The individual dimensionless index values are transformed into a geo-information system and are represented in maps. This enables a comparison of 171 countries, a discussion of the results with decision-makers and them being addressed in public debates."
Insurance was identified as one of the tools that can be used to cope with disasters. Micro-insurance, according to the 2014 report, "has seen rapid development over the last 10 years. Between 2005 and 2011, the number of those insured more than doubled in Latin America and the Caribbean, and even trebled in Africa, so that there, 7.8 and 4.4 per cent of the population are now micro-insured. The micro-insurance market is also growing at a fast pace in Asia, often at two-digit rates. In India, the country with the largest number of micro-insured clients, more than 110 million people are now covered".
Micro-insurance was the subject of articles that I wrote on September 21 and October 12, 2014. These products offer protection against shocks for people with very small incomes. In the event of severe illness, a disaster, an accident or a death in the family, these products prevent them from falling into the poverty trap.
Surveys from regional and European institutions indicate that "more than a quarter of a billion people are micro-insured across the globe. In addition, alone in Asia, 1.7 billion people are safeguarded by so-called 'social micro-insurance', i.e., systems that are very similar to social security systems and are frequently operated and also subsidised by the government. According to a 2010 Swiss Re survey, the market potential is at 2.6 billion people worldwide."
The newspaper article omitted important information. It also failed to provide the proper context for the island's ranking in the 2014 report.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org