Working Paper Series: Special Edition of 2016 to 2018 Interns

Figure 2: Impact of Natural Disasters in the ECCU, 1998-2017 (per cent of GDP)

Impact of Natural Disasters

100% 150% 200% 250% 300%

226%

200%

90%

87%

79%

24.30% 15%

0% 50%

Anguilla Hurricane Irma (2017)

Dominica Hurricane Maria (2017)

Dominica Trop. Storm Erika (2015)

St. Vincent & Grenadines

St. Lucia Hurricane Tomas 2010

Grenada Hurricane Ivan (2004)

St. Kitts and Nevis Hurricane Georges (1998)

Trough System 2013

Total losses as % of GDP

Source: Central Statistics Office, ECCB & Country Reports

As the effects of climate change intensify, the associated financial costs feature more prominently on the societal radar, and consequently, the role of insurance has become increasingly necessary. Insurance has evolved as a process of protecting individuals and companies from financial losses and uncertainties by diversifying risks among policyholders. It also encourages investments in cost-effective mitigation measures through premium reductions and facilitates rebuilding of property and long-term recovery following a disaster by way of claim payments. Therefore, the affordability of insurance is fundamental for economic development and the financial cohesion of society. However, research has confirmed that the availability and affordability of insurance is likely to decrease under worsening climate change conditions. This finding was substantiated with statistical models predicting a significant increase in costs (Cutter et al 2012; Kunreuther, Michel-Kerjan and Ranger, 2013).

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