The Cayman Islands expects to make its first premium payment next month into an insurance pool set up to help protect Caribbean countries hit by disaster.
The $2 million premium is in addition to a one-time $2 million initial participation fee Cayman will put into the Caribbean Catastrophic Risk Insurance Facility.
The premium will provide up to $53.3 million in insurance coverage in event of a hurricane, and $4.7 million if an earthquake should strike the islands.
The coverage is similar to a business continuity insurance policy in that it allows quick payments based on the magnitude of the disaster, rather than payments based on damage estimates. In other words, Cayman would receive more money in the event of a Category 5 hurricane than it would in a Category 1, regardless of the damage caused.
Leader of Government Business Kurt Tibbetts said the key factor is that payment will be received quickly by the 16 participating Caribbean countries should a hurricane or earthquake strike.
‘Thus enabling them to overcome the typical liquidity crunch that follows a disaster,’ Mr. Tibbetts said.
Mr. Tibbetts also pointed out that the Caribbean Risk Insurance facility would not be used as a substitute for other types of insurance coverage.
‘This country insurance coverage is separate and apart from the other…insurances which the Cayman Islands government would carry,’ he said. Those include property, public liability, and vehicle insurance.
The fund will be managed by Sagicor reinsurance, an off-shoot of Sagicor General Insurance, and will incorporate its offices here in Cayman.
The risk insurance facility was set up through the World Bank. Caribbean leaders asked it to help organise the fund following Hurricane Ivan in 2004. The fund is supported in part through donor countries in the Caribbean and outside of it, and is also getting cash from donor reinsurance markets.
Mr. Tibbetts said the yearly payment of $2 million may seem high to some, but reiterated his support for it at a press briefing Friday.
‘You pay for insurance although it might only happen once in a lifetime,’ he said.