First ever catastrophe risk insurance conference held on St. Maarten

POSTED: 09/6/14 2:43 PM

St. Maarten – Henderson Insurances organized the first ever catastrophe risk insurance conference yesterday at the Belair Community Center, featuring special guest and keynote speaker Milo Pearson, chairman of the Caribbean Catastrophe Risk Insurance Facility (CCRIF), the first multi-country risk pool in the world. “It is a regional catastrophe fund for Caribbean governments designed to limit the financial impact of devastating hurricanes and earthquakes by quickly providing financial liquidity when a policy is triggered,” Pearson explained. The St. Maarten insurance industry was well represented at the conference as well, with three panelists speaking on behalf of Nagico, Gulf Insurances, and Ennia respectively.

The CRRIF is essentially an insurance policy exclusively for Caribbean and Latin American governments who are immediately awarded disaster relief funds in the event of a major natural disaster. It is a non-profit organization that caters exclusively to governments in the region due to the fundamental challenges they face, like endemic and widespread poverty, crippling debt, and vulnerability to global climate change.

The CRRIF is an initiative of CARICOM in the wake of Hurricane Ivan which devastated the Windward Islands in 2004. CARICOM approached the World Bank for its technical leadership and know how on setting up the fund, and through the generosity of the governments of Japan, Canada, the UK, France, Ireland, and Bermuda, as well as the European Union and the Caribbean Development Bank , it was established.

Finance Minister Maarten Hassink said he didn’t have to remind everyone about catastrophe, since most people assembled at the conference remembered the devastation and aftermath of Hurricane Luis. He outlined the three challenges that St. Maarten faces when it comes to managing a catastrophe: liquidity, budgetary constraints, and a “fallback position.”

Hassink warned that under current conditions, the island may be able to finance one catastrophe, but not successive natural disasters following each other. He pointed out that Parliament passed a motion recently to have St. Maarten’s liquid reserves at $50 million. “This would help once, but not if the disaster strikes twice.”

The Minister alluded to the challenges a small country like St. Maarten faces when trying to cover its budget, which he said cannot be built up rapidly in case of an emergency. “Income is barely covering expenses.” Before the constitutional changes, he said, St. Maarten had some measure of security being within the fold of the Netherlands Antilles. Now, however, the Netherlands sees the island as “more of a burden than a blessing.”

Hassink was positive about St. Maarten joining the CCRIF as it would offer a greater measure of security for the island. “Since 1995, we have been lucky,” he said, but with St. Maarten becoming a member of the organization it would leave it more capable of dealing with a natural disaster.

Neil Henderson of Henderson Insurances was pleased that a good cross section of the insurance, private, and public sector was covered at the conference. He said those who remember Hurricane Luis had a “moral responsibility to educate and take action to mitigate similar circumstances that we suffered.” The reason for the conference that he organized, he said, was simple: to provide information which can make a difference in bringing the island back to normality as quickly and efficiently as possible.

“Hurricanes pose the greatest risk to the Caribbean, through climate change,” Pearson said, though earthquakes also pose a significant risk as the islands lie along a major tectonic fault line. Caribbean small states are limited in their means to finance catastrophes themselves as they lack the economies of scale that a large country like the US has, and their high debt ratios makes it difficult for them to borrow on the international credit markets, he explained.

Pearson said that only governments are policy holders, not individuals, and they are free to use the funds given to them after a disaster as they see fit. “We’re hoping to expand its membership with St. Maarten,” he concluded.

The panelists who have presentations on the insurance industry were Dwayne Elgin of Nagico, Jason Clark of Gulf Insurance, and Gilbert Martina of Ennia.

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