Arscott wants disaster insurance renegotiated
Minister of Local Government and Community Development Noel Arscott has expressed dissatisfaction with the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
"I believe that the risk insurance that the Government pays for every year is a peculiar fund because of the way it is structured, and I have actually had discussions with the Ministry of Finance to see if we can re-examine the terms and conditions. Like every insurance policy you purchase, there is the fine print," he said, while addressing the press launch of Earthquake Awareness Month.
On an annual basis, Jamaica pays more than US$30 million as part of its obligations to the CCRIF.
The CCRIF allows Caribbean governments to purchase coverage similar to business-interruption insurance and provides immediate liquidity in case of a major hurricane or earthquake. Because of the financial structure of the insurance instrument used, the CCRIF provides participating governments with coverage tailored to their needs at a significantly lower cost than if they were to purchase it individually in the financial markets.
World Bank documents indicate that the fund operates by combining the benefits of pooled reserves from participating countries. It is the complexity of this arrangement that appears to concern Arscott.
"I have noticed that Barbados had disaster events twice and they got full payout, so our technical people, we need to sit them down and look at the parameters that we have bought into with this insurance," Arscott said.
The Government of Jamaica has long talked about renegotiating the CCRIF, arguing that the country has not been able to benefit from the insurance facility.
REGIONAL CATASTROPHE FUND
The facility is a regional catastrophe fund for Caribbean governments designed to limit the financial impact of devastating hurricanes and earthquake.
Responding to questions posed by Opposition Member of Parliament Audley Shaw in Parliament in 2012, Prime Minister Portia Simpson Miller said that Finance Minister Dr Peter Phillips had made contact with the insurers following the passage of Hurricane Sandy and was told that Jamaica had not been hit-hard enough and, therefore, could not benefit.
According to Simpson Miller, the insurers estimated total damage at US$26 million, or J$2.4 billion.
Isaac Anthony, CEO of the CCRIF, said later that Jamaica's hurricane policy with the CCRIF was not triggered after Hurricane Sandy because losses were below the policy's attachment point, or "deductible".
"When a CCRIF policy is triggered, it usually represents severe impacts with much death and destruction because risk transfer represents that component of a country's disaster strategy that comes into play when losses are so extreme that usual national budgets are not able to address the extent of losses."