Cedric Stephens | Closing the insurance gap

Last Sunday, Christopher Burgess, PhD, civil engineer, land developer, climate change scientist, and newspaper columnist, drafted a blueprint of how government should approach rebuilding of the housing stock that was damaged and destroyed by Hurricane Melissa.

Smart recovery, he wrote, must combine land tenure regularisation with a house starter kit to move families into permanent, climate-resilient homes.

“Rebuilding must focus on quick action, address land tenure so families can invest safely, and transition the vulnerable to permanent concrete or block-and-steel housing, just as the country did after Hurricane Charlie in 1951,” he said.

In late November, Local Government Minister Desmond McKenzie, according to The Jamaica Observer, also spoke about rebuilding. His comments were made in the context of the National Building Code.

“Our building code has stood up, but there needs to be a lot more and the country must be prepared to work with us when we introduce measures which will be done to preserve life and property. This thing where people just get two sheet(s) of zinc and some ply and put down a house in the middle of a riverbed and when you talk to them they say they are poor. The time has come when we must forget about whether you poor or rich, because disaster don’t know nobody,” the minister said.

There will be greater enforcement of the code in 2026, he warned.

The Office of Disaster Preparedness and Emergency Management (ODPEM) was recently transferred from the Ministry of Local Government’s portfolio to the Office of the Prime Minister (OPM), according to the Jamaica Information Service.

Records show that the building code development process spanned a decade and resulted in the enactment of The Building Act 2018. Enforcement of that law supposedly began in January 2019. The code was designed to improve safety, resilience, and sustainability.

Was the transfer of ODPEM from the Ministry of Local Government to the OPM about logistics, as was officially announced? Or, did Hurricane Melissa reveal information about the non-enforcement of the building code and the persistent leadership problems at the disaster management agency – subjects for which the local government ministry was responsible? In the meantime, the prime minister was preaching about resilience to local and international audiences.

Mr Burgess’ article painted a picture of the housing stock in western Jamaica and changes in building construction methods post-Hurricane Charlie. When Minister McKenzie’s comments about the non-enforcement of the Building Act are linked to some of the issues Mr Burgess identified, they partly explain why most local households do not have access to insurance and why the default response of households and small businesses to catastrophes is to seek government assistance to fund recovery efforts event instead of pre-funding insurance solutions.

The severity and frequency of back-to-back hurricanes like Beryl and Melissa and their combined impact on Jamaica’s economic development and the low insurance penetration rate raise questions about the effectiveness of the insurance market when compared to providers of telecoms services.

The mobile-phone penetration rate for Jamaica during 2024-2025 was 108 per cent. The figure exceeds 100 per cent because it measures the number of active mobile connections (SIM cards) relative to the total population.

Insurance premiums represented less than five per cent of gross domestic product (GDP) over the same period. That figure highlights a major protection gap for property insurance. My November 16 article quoted Verisk Extreme Events Solutions estimates that only two out of every 10 houses were covered by insurance.

The Insurance Development Forum (IDF) is a global public–private partnership. It was formed in 2015 to bring together the insurance industry, the United Nations, and the World Bank, to close protection gaps and build resilience against disasters. Its mission is to “optimise and extend insurance and risk management capabilities so vulnerable people, communities, businesses, and governments can withstand disasters and economic shocks”. The IDF launched a 36-page booklet, Increasing Insurability to Close Protection Gaps, during last month.

It provides a structure to guide the plans of policymakers and others during rebuilding, increase insurability, and to close the protection gap. It examines why particular risks may not be insurable against natural catastrophes. If many of these conditions are met, the insurance industry is likely to find a solution, and the prospects for insurability will increase.

The features that reduce insurability include:

● Lack of resilience: Countries like Jamaica, and emerging markets and developing economies, or EMDEs, are often less resilient to natural catastrophes because of a combination of structural, economic, institutional, and social vulnerabilities. For example, Japan’s last earthquake occurred on December 8 this year. It had a magnitude of 7.5. No deaths were reported.

● Limited infrastructure resilience: Roads, buildings, power grids, and water systems are often poorly built, inadequately maintained, or outdated, making them more likely to fail during disasters, as limited resources are directed to other, more urgent priorities.

● Insufficient financial resources: All countries must prioritise their limited financial resources, especially EMDEs. Despite their significant value, investments in disaster preparedness, emergency response systems, and post-disaster recovery often take a back seat to areas such as education, transport networks, security, and social services.

● Insufficient governance and planning: Disaster risk management is often overlooked because of competing priorities, lack of coordination between agencies, if indeed such agencies exist, and limited technical understanding and/or capacity for long-term planning.

● High informality: A large proportion of EMDE economies often operate informally, meaning that workers and businesses are outside formal safety nets and regulatory protections, slowing and complicating recovery.

● Rapid urbanisation: Unplanned, rapid urban growth results in dense settlements in hazard-prone areas – such as floodplains or unstable hillsides – that lack adequate infrastructure or services.

● Environmental degradation: Deforestation, soil erosion, and poorly managed water systems can heighten the impact of natural disasters such as floods and landslides.

● Limited early-warning and response systems: Early-warning systems, emergency services, and evacuation plans are often inadequately developed, leading to increased casualties and damage.

● Lack of data: There is insufficient data of the quality required to evaluate the risk exposure and vulnerability of physical assets.

Prime Minister Holness, according to my June 29, 2025 article, outlined elements of the country’s natural disaster risk strategy at the start of this year’s hurricane season. It was not known at the time that Hurricane Melissa would have destroyed 41 per cent of Jamaica’s GDP.

It is hoped that the information he has gathered after the record-breaking hurricane will strengthen his commitment to implement the strategy. Further, that will be followed by action during the process of rebuilding and contribute to the reduction of the protection gaps.

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 or business@gleanerjm.com