Caribbean Disaster
Mitigation Project
Implemented by the Organization of American States
Unit of Sustainable Development and Environment
for the USAID Office of Foreign Disaster Assistance and the Caribbean Regional Program
Caribbean Disaster
Mitigation Project |
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Bulletin Date: December 1999
Since its inception, the Caribbean Disaster Mitigation Project (CDMP) has worked with the insurance industry in the Caribbean to promote incentives for loss reduction and hazard mitigation. To this end, CDMP has organized joint workshops on with the insurance industry in Jamaica, the Dominican Republic, the Bahamas and Belize to encourage the industry to promote disaster mitigation. This work culminated in the support given to the CARICOM Working Party on Insurance and Reinsurance in the preparation of a policy paper for the CARICOM Heads of Government (CARICOM Secretariat, March 1996). A significant initiative in promoting loss reduction through incentives was taken in May 1998, when the United Insurance Company of Barbados launched a program offering premium discounts for retrofitting of properties.
In Jamaica, CDMP is assisting the Insurance Institute and the Office of Disaster Preparedness in using detailed hazard maps for risk assessment.
A new initiative in property insurance announced by United Insurance of Barbados in the summer of 1997 provides incentives to policyholders, in the form of substantial premium reductions, to apply measures that would safeguard their properties against the perils of hurricanes. United produced two booklets, Making your Home Hurricane Resistant and Professional Guide to Performance-based Design Upgrade for Hurricane Resistant Construction, which outline hurricane-resistant construction techniques and serve as checklists for determining insurance premium credits for retrofitting. The expectation is that reduced insurance premiums will encourage property owners to invest in hazard mitigation for their properties, resulting in a decreased overall risk to natural hazards. The CDMP participated in the public launching of the program, and is assisting United with monitoring public acceptance of the program and its expansion to the Eastern Caribbean.
An evaluation of the program one year after its launch showed that its penetration was less than what was expected at the outset. Possible causes for the lack of success were identified as: (1) low perception of risk by the population: the last serious storm to affect Barbados was Hurricane Janet in 1955; (2) a soft catastrophe insurance market, encouraging commission-driven competition by smaller insurance agencies, which undercut the premium reductions offered by UIC, without requiring retro-fitting; (3) deficiencies in the promotional effort, particularly the lack of a user-friendly presentation of the guidelines for property owners.
In light of the experience gained in Barbados, a new program for launching in Antigua and Barbuda. The program incorporates the lessons learned in Barbados, and includes features that provide reasonable assurance that the same limitations would not be encountered in the new market. Antigua and Barbuda was selected because of its firmer market for catastrophe insurance due to several instances of hurricane events over the last decade.
The program was launched by ANJO Insurance, agents for UIC in Antigua, in July of 1998. So far it has been offered exclusively to residential owners, and, as of the end of 1999, nearly 100 homeowners have joined the program, approximately 35 percent of which are new clients. A preliminary analysis of damage claims generated by the participating homeowners following hurricanes Jose and Lenny indicates that insured losses from this group are lower as a proportion of total risk than what was experienced by the non-participating policy holders.
The CDMP participated in the 17th annual conference of the Insurance Association of the Caribbean (IAC), held in Barbados in June 1997. At this conference, considerable attention was paid to natural hazard mitigation and loss reduction. In his opening address, the Rt. Hon. Owen Arthur, Prime Minister of Barbados, focused on the findings and recommendations of the CARICOM Working Party report, particularly the need for better information on the Caribbean insurance market and a call for a greater retention of insurance risk within the Caribbean region. In the session entitled "The Caribbean—a Disaster Area" presenters reviewed the natural hazards that threaten the Caribbean region and vigorously promoted loss reduction through appropriate building standards for siting and design. CDMP distributed copies of its publications Insurance, Reinsurance and Catastrophe Protection in the Caribbean Basin and Estimation of Building Damage as a Result of Hurricanes in the Caribbean to conference participants. The international reinsurance market was well represented at this meeting, demonstrating a renewed interest in the Caribbean insurance market. Attention paid at this conference to natural hazards and mitigation should continue to move insurers and reinsurers in the Caribbean towards active promotion of loss reduction within the region.
In early 1995, CDMP agreed to support the CARICOM Working Party on Insurance and Reinsurance, formed by the Heads of Government at their fifteenth meeting to study critical insurance issues against the background of increased frequency of destructive hurricanes in the Region. CDMP prepared a working paper on Catastrophe Protection in the Caribbean that served to guide the deliberations of the CARICOM Working Party. At the invitation of the OAS, the World Bank joined the effort. Consultants from CDMP and the World Bank visited Trinidad during the IAC Annual General Meeting, and participated in meetings of the Working Party in Barbados (October 1995) and Jamaica (December 1995). The working paper outlines mechanisms for strengthening the regional insurance industry, for reducing the risk exposure and vulnerability to natural perils as well as for increasing the availability of affordable insurance. This document served as a basis for the final CARICOM Working Party Report adopted by the CARICOM Heads of Government in March 1996.
The World Bank is supporting further work on one of the primary recommendations of the Working Party Report, the establishment of a regional reinsurance pool for the Caribbean. The World Bank commissioned a draft paper on alternative arrangements for such a pool and, in July 1997, convened a meeting in Kingston Jamaica to discuss this proposal. Subsequent to this meeting, the World Bank and the CDMP collaborated on a probable maximum loss estimate for critical infrastructure in Dominica, St. Lucia and St. Kitts and Nevis.
On October 22 1997, the Bahamas General Insurance Association (BGIA) hosted a daylong seminar on natural hazard mitigation. Almost one hundred public and private sector personnel participated in the seminar, which addressed the link between building practices, damages from hazards and insurance premiums. Participating insurance agencies were encouraged to promote hazard mitigation by providing lower insurance premiums for appropriately constructed or retrofitted structures. CDMP collaborated with the BGIA on this seminar by providing copies of CDMP reports for the participants and by assisting the participation of the keynote speaker. CDMP reports provided included Insurance, Reinsurance and Catastrophe Protection in the Caribbean; Estimation of Building Damage as a Result of Hurricanes in the Caribbean; and Manual for Caribbean Electric Utilities Addressing the Issue of the Mitigation of Damage caused by Natural Hazards to Civil Works.
In March 1996, a local disaster management seminar was held in Belize to sensitize senior public and private sector officials on the importance of disaster management and the role their agency/organization can play in the implementation of disaster management activities. This seminar was co-sponsored by USAID, CDMP and ORINCO, the local insurance organization in Belize. Over 70 participants—from the fields of engineering, architecture, planning, banking, insurance and coastal zone management—attended the workshop. As a result of this workshop, Belize financial institutions agreed to meet with representatives of the architect and engineering association and the Town Planning Department to identify specific procedures and activities which should be implemented to effect changes in the financial, construction and planning sectors. In 1999, the Belize Chamber of Commerce and Industry coordinated an effort, with the institutions, to develop a national building code for Belize.
In May 1995, CDMP and the Camera de Aseguradoras de la Republica Dominicana (CADOAR) held a two-day workshop on Probable Maximum Loss (PML) calculation. Workshop participants included 45 insurance industry representatives, the director of the national meteorological service, a representative of the Caribbean Association of Civil Engineers, and five US-based risk management consulting firms. The US firms participated at their own expense, for the opportunity to present their services to the assembled insurance companies. The workshop resulted in practical guidelines for CADOAR on the organization of and mobilization of resources for a nationwide PML study.
In Jamaica, local insurance agencies and the Insurance College met with engineers and architects to discuss follow-up activities to the recommendations of a CDMP-sponsored workshop held in the fall of 1994. The Jamaica Association of General Insurance Companies (JAGIC) took the initiative to form a joint subcommittee with membership drawn from the insurance sector, the architects' and engineers' associations and the University of Technology (formerly CAST). This committee has been mandated to prepare a comprehensive proposal on the incorporation of:
The committee was unable to conclude the proposal and ceased its activities in late 1996.
Hazard mapping and risk assessment: In the summer of 1999, the CDMP completed a systematic assessment of seismic, landslide and coastal storm surge hazards affecting the Kingston Metropolitan Area. Under the coordination of the Office of Disaster Preparedness and Emergency Management (ODPEM), applications of this information are being developed as inputs for land use policy and planning, and for catastrophic risk assessment in the insurance sector.
In October 1999, the Insurance College of Jamaica and the ODPEM organized a one day seminar for management and underwriters of property insurance companies. The purpose of the seminar was to present VMA hazard Maps, and to discuss their utilization and application by the insurance industry.
The Caribbean Disaster Mitigation Project (CDMP) is a coordinated effort to promote the adoption of natural disaster mitigation and preparedness practices by both the public and private sectors in the Caribbean region. The CDMP is funded by the USAID Office of Foreign Disaster Assistance (OFDA) and implemented by the Organization of American States/Unit of Sustainable Development and Environment (OAS/USDE) for the USAID/OFDA Office in Kingston, Jamaica.
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