The Government’s layered approach to financing natural disaster risks has been hailed by the Economic Programme Oversight Committee (EPOC) as a proactive and important development as the country continues to deal with climatic vulnerabilities.
EPOC Chairman Keith Duncan, during a press briefing on Tuesday, December 5, said that the Government has been “very proactive” with the country’s Natural Disaster Risk Financial Strategy, which is an International Monetary Fund (IMF) structural benchmark.
“This [strategy] involves establishing adequate funds and reserves to retain the costs associated with both low- and high-frequency events, such as floods, heavy rainfall, hurricanes and earthquakes. The Government also maintains a National Disaster Fund capitalised at J$465.6 million as at end June 2023, and a Contingency Fund, which, as at end June 2023 amounted to J$5 million,” Duncan said.
The Government also has in place an Inter-American Development Bank (IDB) Contingent Line of Credit, which provides access to US$285 million, if the country is affected by a hurricane and/or earthquake of a specified severity.
In addition, Duncan noted that the Government has renewed its insurance policy with the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company for the 2023/24 financial year.
“This insurance policy protects against Tropical Cyclone, Earthquake and Excess Rainfall events. Total coverage under this policy for 2023/24 amounts to US$233.9 million,” the EPOC chairman indicated.
Another significant dimension to the Government’s multilayered approach to disaster risk financing was the historic launch of a Catastrophe Bond (CAT bond) in July 2021.
Pointing out that this was “the first time in history a small island nation has been able to do this,” Duncan explained that the instrument provides financial protection of up to US$185 million against losses from named storms for three Atlantic tropical cyclone seasons, ending December 2023.
Payouts to Jamaica will be triggered when a named storm event meets the parametric criteria for location and severity in accordance with the terms of the bond. The Government is also in the process of establishing a National Natural Disaster Reserve Fund to supplement the existing portfolio of risk financing instruments.
“So, everybody sees that we are covered. Even for earthquakes where we had our recent tremors and earthquakes in Jamaica, we are covered as a country based on our national natural disaster risk financing strategy,” Duncan said.
“I think this is a very important development because we know that these shocks [and] natural disasters can really have an impact on our country. We saw that with Hurricane Gilbert, we saw that with several hurricanes that hit Jamaica and it takes a while to recover, and we [now] have a layered approach to financing natural disaster risks,” he added.