I read with interest and disappointment, that it is unlikely that the Sister Islands will benefit from the 16-member Caribbean Catastrophic Risk Insurance Facility of which the Cayman Islands is a participant, to assist with the impact of Hurricane Paloma.
Based on the reported statements from a representative of the CCRIF it seems that the way in which the risk and payout model is structured the estimated damages would not trigger an automatic payout from the CCRIF to assist the Sister Islands. This is because the policy is focused on the Cayman Islands as a whole and it is not estimated that there is significant damage to economic activity or government infrastructure required for continuity of national administration.
That may well be the case in terms of looking at the nation as a whole but it seems pointless that the Sister Islands, which is a separate and unique area of economic activity, has not been addressed by the policy’s parameters, after the devastating effect of Hurricane Paloma for a number of reasons:
The Sister Islands gross domestic product, which is the measure of the size of its economy, is likely no more than $50 million. I participated some years ago in what may be one of the only original measures of the Sister Islands GDP and at the time it was approximately $35 million and would have grown since then.
Approximately 50 per cent of all economic activity in the Sister Islands is related directly or indirectly to the public sector. Therefore even if the damage to public sector infrastructure is not large in absolute numbers, it is important to understand that the resulting impact of any damage to government infrastructure on the Sister Islands economy will still be very significant.
While there are no official estimates of the actual damage in the Sister Islands as yet, it is obvious that even if the financial damage ranged from the $15 million to $20 million as recently quoted by one government official, that this would amount to between 30 per cent and 40 per cent of the Sister Islands GDP. If that does not qualify as an economic disaster, then nothing else will.
For the purposes of an insurance facility aimed at dealing with economic risks, the Sister Islands should be treated differently to one of the other districts due to a number of implications owing to their unique geographical location.
The Cayman Islands suffers from a unique disparity between its official GDP and the local reality as far as the actual measurement of the domestic economy is concerned. Figures from the international business sector (offshore financial services) are included in the measure of what constitutes the country’s GDP.
This figure is then divided by the total resident population to get the GDP per capita, which is the traditional proxy measure of the standard of living used by most countries and bodies like the World Bank and IMF. The Cayman Islands has one of the highest GDP per capita anywhere in the world, which now stands at around US$45,000.
Because of this the country is often treated as it were better off than it really is in terms of access to resources. It therefore tends to fail to qualify for certain types of assistance as compared to other countries which are more obviously developing countries.
But we should not let that traditional issue impact our ability to draw on an insurance facility such as the CCRIF.
If the parameters of the insurance policy really do not take into account the unique nature of the Sister Islands as an important and separate economic area of the Cayman Islands, then it would appear that the policy (or our participation in it) is seriously flawed.
If this assumption is incorrect then hopefully the relevant authorities will be able to draw on the funds with urgency and the reported statements of the CCRIF, which suggest that assistance to the Sister Islands is unlikely, are incorrect.
Paul Byles
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