The government will meet next week with officials from a Caribbean hurricane insurance fund to discuss whether to continue with the policy or explore other alternatives.
Despite the devastation wrought by Hurricane Paloma last month on Little Cayman and Cayman Brac, no payout will be made by the Caribbean Catastrophe Risk Insurance Facility, into which the government has paid $6 million in premiums.
The CCRIF is a region-wide fund meant to assist Caribbean governments of islands devastated by hurricanes or earthquakes.
Leader of Government Business Kurt Tibbetts said: ‘The difficulty here is with the best of intentions, this facility does not serve the entire purpose we would have expected it to serve and the Cayman Islands will have to make some sound decisions very early after we have had these discussion whether it is appropriate, given our geographical layout, to continue with that policy or be better served with dealing with it in another fashion by way of reserve funding on an annual basis.’
According to the policy criteria, payouts are based on the weighted average wind speed spread across Cayman’s three islands. The wind speeds experienced in Grand Cayman during hurricane Paloma did not reach the minimum required by the policy, and damage caused by the hurricane Paloma was localised to Cayman Brac and Little Cayman.
The CCRIF was launched at the start of last year’s hurricane season, in June 2007.
Mr. Tibbetts said that because the fund was so new, there was still a learning curve for those involved – both donor countries and governments that might benefit from the fund.
‘I suspect some of the criteria and triggering mechanisms will have to be looked at and reviewed in order for it to be seen to be fair,’ he said.
Cayman is one of 16 countries within the CCRIF.
The CCRIF issued a report on 21 November that stated that the Cayman Islands would not receive a payout in respect to Paloma. That report is being audited by PriceWaterhouseCooper and a report from the auditing company is expected in the next few days, Mr. Tibbetts said.
He said the government would meet with CCRIF officials on Friday, 12 December, including the Facility’s Supervisor Simon Young, to discuss possible enhancements to the programme coverage, including whether there may be ways of ‘massaging the policy specific to Cayman Brac and Little Cayman, even if there is a smaller, separate premium’.
At the briefing, Cabinet ministers denied that they had failed to look into the criteria carefully enough before paying into the fund.
‘We could not have known that there would not be a payout,’ Mr. Tibbetts said.
Minister Alden McLaughlin pointed out that, despite the grave situation on the Brac, the government had the financial ability to deal with the damage.
‘The Cayman Islands government has the wherewithal to manage because the damage is significantly less than we had to deal with in Ivan.
‘If the storm had not changed course, if Grand Cayman had gotten the full impact of Paloma, we would be praising God we had the benefit of the CCRIF policy because the damage would have been in the hundreds of millions of dollars,’ Minister McLaughlin said.
Under the policy, payouts, if approved, are made within 14 days of a devastating hurricane if winds exceed a certain speed in an area where a significant quantity of government infrastructure is affected.
Michael Nixon, senior assistant financial secretary said that, according to the CCRIF assessment, if wind speeds from Paloma had reached in Grand Cayman at the same speeds they had reached in Cayman Brac, the country would have received almost US$40 million.
Maximum payout, based on Cayman’s premium of $2 million, is US$55 million for hurricane damage and US$8 million for hurricanes, Mr. Nixon said.
The CCRIF was set up following a conference held in February 2007 by the World Bank in which a total of US$47 million was pledged by Canada, France, UK, the World Bank and the Caribbean Development Bank.
Mr. Tibbetts also addressed European Union hurricane relief funding of CI$7.47 million, which was promised to Cayman following 2004’s Hurricane Ivan. So far, Cayman has received only one tranche of that funding – CI$1.04 million – and has been given an extension on a deadline to commit the spending of those funds by 1 April.
Mr. Tibbetts said a recent meeting with EU officials revealed that CI$4.5 million would need to be spent by then.
‘There is also the ability to get reimbursement of some $1.3 million already spent, which was used by National Recovery Fund via funding from the Cayman Islands Government during the period May 2006 to June or July 2008. That $1.3 million, which will be reimbursed, can be diverted to Cayman Brac,’ he said.
Referring to rebuilding and renovations needed to be done on Cayman Brac, Mr. Tibbetts said the NRF would look to hiring construction crews from Grand Cayman. Previously, the NRF had been told to focus on hiring Cayman Brac crews, but Mr. Tibbetts said getting construction teams from Grand Cayman was now necessary due to the amount of work that needed to be done.
‘The limited number of contractors on Cayman Brac is extremely busy right now,’ he said, adding that there was no intention of seeking contractors from outside the country.