Cayman Islands legislators have agreed to spend $4 million for an insurance fund being set up to help Caribbean countries access cash quickly in the event of a catastrophe.
Leader of Government Business Kurt Tibbetts said $2 million will go for the initial participation fee and another $2 million will represent the annual premium payment to the fund, which is called the Caribbean Catastrophic Risk Insurance Facility.
Mr. Tibbetts said 16 countries have joined the fund, which was set up through the World Bank and which will be operated by Sagicor Reinsurance, an off-shoot of Sagicor General Insurance. He said the main offices for the fund would be in Grand Cayman.
The $2 million premium will provide Cayman with up to $53.3 million in insurance coverage in the event of a hurricane and up to $4.7 million if an earthquake should hit the islands.
Generally, insurance adjusters must survey damages caused by natural disasters before agreeing on a pay out. The Caribbean insurance fund would pay based on the magnitude of the incident that occurred.
In other words, participating countries would receive a higher payment if a Category 5 hurricane strikes than they would receive if a Category 1 hit their shores, regardless of the damages.
“A paramount advantage would be the speed of recovery of funds,” said Financial Secretary Kenneth Jefferson. “What has to be proven, in the case of a hurricane…the strength of the wind would have to be determined.”
“This insurance will place us to the point where, should anything happen…there will be a pay out and we don’t have to go through normal insurance procedures,” Mr. Tibbetts said.
Government leaders said this insurance plan is separate from disaster insurance the Cayman Islands maintains on public properties. Mr. Tibbetts said it would not be used as a substitute property insurance policy.
Opposition party members raised several concerns in the LA about the insurance plan, although the funding for it passed unanimously after debate.
“What happens when you have minor storms, which normally wouldn’t cause a lot of damage, but because of the situation, they do?” asked opposition MLA Rolston Anglin.
Mr. Anglin also wondered whether other disasters sparked by hurricanes and earthquakes, such as tornadoes or a tsunami, were covered under the policy.
Mr. Tibbetts said that such events were unlikely, but he agreed Mr. Anglin had raised a valid question and promised to pursue it with fund managers. He also noted Cayman has the option to withdraw from the fund and get back its $2 million initial participation fee if it so chooses.
Opposition members were troubled by the security of offshore funds as well, but Mr. Tibbetts noted having the fund management office in Cayman should help allay those fears.
The money Cayman will pay into the insurance fund was approved as part of a supplemental appropriation in the Cayman Islands government’s budget.
Caribbean countries, international donors, and private organisations have given more than $47 million to the insurance pool.
Caribbean community leaders asked the World Bank to help organise the insurance facility after Hurricane Ivan struck in 2004. The storm was blamed for 121 deaths in the Caribbean and southern United States. U.S. damage estimates put the cost from Ivan at $8.5 billion.
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