Working Paper Series: Special Edition of 2016 to 2018 Interns

Based on the post disaster assessment conducted by the Economic Commission for Latin America and the Caribbean (ECLAC) in collaboration with the ECCB after the passage of hurricane Irma in September 2017, it was discovered that, of the 4,935 dwellings in Anguilla, more than 60.0 per cent were not insured and only 8.0 per cent of these dwellings had their contents insured. Damage to these uninsured and underinsured households may place a heavy burden on public finances and gives rise to unlimited contingent liabilities, as most governments may feel obligated to provide post-disaster emergency relief and assistance to affected households and businesses. To supplement the government’s central role, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) was launched in 2007 to aid in the financing of early renovation and public-sector costs in the wake of natural catastrophic events 55 . However, CCRIF is only a solution to the short-term liquidity needs, as the sums disbursed oftentimes represent a small fraction of the required sums for effective reconstruction to take place. Nevertheless, the facility does provide an important buffer for member governments in the immediate aftermath of a natural disaster. What may be of some concern, though, is that the increasing intensity of disasters is likely to result in larger premium payments for governments as claim payments from CCRIF rise in tandem with the level of destruction caused. Current Challenges or Shortcomings One of the most important objectives of the ECCB is the maintenance of a strong, diversified and resilient financial sector through the implementation of strategies to mitigate the impact of threats and challenges. One of those threats is the viability of the insurance sector after a major disaster. The ability of the insurance company to adjust contractual underwriting terms, pricing or limit exposure to offset these rising costs is constrained by the following shortcomings:

55 CCRIF was created by CARICOM Heads of government in collaboration with the World Bank because of the damaged encountered during the 2004 hurricane season. The sixteen member countries are Anguilla, Antigua & Barbuda, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Dominica, Grenada, Haiti, Jamaica, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Trinidad & Tobago and Turks & Caicos Islands

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