Grand Cayman, 18 August 2010 – The Caribbean Catastrophe Risk Insurance Facility (CCRIF) has released the preliminary results of a study on the Economics of Climate Adaptation (ECA) in the Caribbean. In releasing the results, CCRIF Chairman Milo Pearson indicated that they will “enable countries in the region to develop fact-based adaptation strategies that can be incorporated into national development plans to increase resilience against climate hazards.” The results for eight pilot countries (Anguilla, Antigua and Barbuda, Barbados, Bermuda, the Cayman Islands, Dominica, Jamaica, and St. Lucia) are presented in a short brochure entitled, Enhancing the climate risk and adaptation fact base for the Caribbean (Preliminary Results).
The ECA study, launched in February this year, was conducted by CCRIF, with Caribbean Risk Managers acting on behalf of the Facility, and supported by regional partners, the Caribbean Community Climate Change Centre (5Cs), the UN Economic Commission for Latin America and the Caribbean and others. McKinsey & Company and Swiss Re provided analytical support.
The study has been welcomed by Caribbean countries which realise that climate change has the potential to greatly exacerbate their risks from hurricanes and storms. Findings from the study indicate that annual expected losses from wind, storm surge and inland flooding already amount to up to 6% of GDP in some countries and that, in a worst case scenario, climate change has the potential to increase these expected losses by 1 to 3 percentage points of GDP by 2030. CARICOM Secretary General Edwin Carrington says that the study “makes an important contribution to developing the capacity to address the climate change challenges facing the Caribbean … [and] will be of immense value to both Caribbean policymakers and the business sector, in their efforts to develop and implement sound adaptation strategies and plans.”
Decision makers can select both risk mitigation (e.g. constructing sea walls and enforcing building codes) and risk transfer initiatives (e.g. insurance) to address current climate hazards and respond to the growing threat of climate change. Depending on a country’s characteristics, the preliminary results of the study suggest that risk mitigation initiatives can cost-effectively avert up to 90% of the expected loss in 2030 under a high climate change scenario. Risk transfer measures play a key role in addressing the financial consequences of low-frequency, high-severity weather events such as once-in-100-year catastrophes by limiting the financial impact of these events. The expected loss that can be averted cost-effectively is driven by various factors, for example, the value of buildings and the share of expected loss caused by coastal flooding/storm surge. The best approach for each country is determined specifically by its topography, exposure to hurricanes, and value and vulnerability of assets.
The results presented in the brochure were generated from the input of regional stakeholders and experts as well as several country representatives. As a next step, CCRIF would welcome the opportunity to further engage with countries via workshops to obtain feedback on the initial results and to determine potential areas for more detailed work. Following consultation with the countries and subsequent refinement of results for the eight pilot countries, the team will work closely with interested countries and regional institutional and funding partners to enable application of the methodology on an ongoing basis throughout the Caribbean.
The benefits of the ECA study are clear. The study provides a sound economic fact base that countries can use to further develop their national climate adaptation and disaster management strategies. For example, the study prioritises areas and sectors at risk and provides clear inputs for building an economically viable portfolio of adaptation initiatives designed to increase each country’s resilience.
Additionally, the results of this study can be used by governments in multi-lateral and bilateral funding discussions. Given the current and future financial situation of many developed and developing countries, access to funding will be enhanced by a country’s ability to support effective business cases with sound quantitative data. This study provides a relevant toolkit to aid Caribbean countries to do this. The preliminary results can assist with preparations for the approaching COP16 Climate Change Conference in Cancun, Mexico that starts in November, 2010 and 5Cs has already agreed to include the ECA work in their coordination of a CARICOM presence at the conference. At COP16, Caribbean and other small island developing states aim to engage in dialogue regarding positive actions on adaptation and disaster risk management, thereby potentially garnering financial assistance for the region.
The brochure, available on the CCRIF website at www.ccrif.org, will also be widely distributed in hard copy.
About CCRIF: CCRIF is a risk pooling facility, owned, operated and registered in the Caribbean for Caribbean governments. It is designed to limit the financial impact of catastrophic hurricanes and earthquakes to Caribbean governments by quickly providing short term liquidity when a policy is triggered. It is the world’s first and, to date, only regional fund utilising parametric insurance, giving Caribbean governments the unique opportunity to purchase earthquake and hurricane catastrophe coverage with lowest-possible pricing. CCRIF represents a paradigm shift in the way governments treat risk, with Caribbean governments leading the way in pre-disaster planning. CCRIF was developed through funding from the Japanese Government, and was capitalised through contributions to a multi-donor Trust Fund by the Government of Canada, the European Union, the World Bank, the governments of the UK and France, the Caribbean Development Bank and the governments of Ireland and Bermuda, as well as through membership fees paid by participating governments.
Sixteen governments are currently members of CCRIF: Anguilla, Antigua & Barbuda, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Dominica, Grenada, Haiti, Jamaica, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Trinidad & Tobago and the Turks & Caicos Islands.
For more information, contact Simon Young at syoung@caribrm.com or CCRIF at pr@ccrif.org or visit the CCRIF website at www.ccrif.org.