Gareth Manning, Sunday Gleaner Reporter 
It is not an immediate risk, but global climate change is being identified by insurers worldwide as the greatest strategic threat to the insurance industry.
According to the 2008 Strategic Business Risk Report by world-leading auditors Ernst & Young, risk managers are predicting that changing weather patterns will cause more insurers to scrutinise their insurability criteria for certain risks resulting from an increase in the probability of the policyowner's loss.
Those are issues already facing the volatile Caribbean region, chief executive officer of Caribbean Risk Managers Limited (CariRM), Dr Simon Young, explains to The Sunday Gleaner.
"What I think is more likely to happen is that insurers in the region will become more selective in their underwriting and will start to more accurately match the cost of coverage to the risk faced," he reasons.
Young adds: "This will mean that those who choose to live in exposed places will tend to see most, if not all the effects of price increases due to climate change."
Managing director of British Caribbean Insurance Company Limited (BCIC), Leslie Chung raises a similar point. He is worried that with the haphazard planning taking place in Jamaica, many assets will remain vulnerable.
Frequent, severe storms
Chung underscores the point that with climate change expected to result in more frequent and severe storms, regulatory bodies and planning agencies need to step up their monitoring and regulation of both major and minor projects to meet building and planning standards. While building standards improved after Hurricane Gilbert in 1988, Chung says, there appears to have been a lapse.
"If the town planners, the parish councils, NEPA don't take these issues into mind and if the KSAC for instance, does not go down into August Town and tell the people that they cannot build houses in what has been traditionally the flood area of the Hope River ... then I wouldn't have a problem as an insurer," Chung states.
Similarly, he wants hotel expansion along the north coast to be controlled to prevent any backlash on the insurance sector.
"If a hotel, every house or villa was built 200 yards from the high-tide level, and 300 feet above sea level, and built with a hard roof that is properly anchored then, we wouldn't have a worry," Chung points out.
Aside from obvious physical planning issues, Young notes that the Caribbean insurance industry has low capitalisation and, therefore, is very vulnerable to price increases as the global market responds to individual catastrophes within the region and around the world.
Pool of funds
This is why it is important, he explains, for the region to have a pool of funds that can give short-term relief in the event of a catastrophe. Last year, the Caribbean became the first to establish a regional disaster-insurance facility when it established the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
The facility covers 16 Caribbean Community (Caricom) countries, and operates on a parametric model to provide indemnity to the countries in the event of a major hurricane or earthquake.
"One of the long-term benefits of CCRIF is that by building up a substantial pool of funds, it will have the ability to remove most of the volatility and provide a constant pricing of insurance for those small parts of government exposure it is designed to cover," Young states.
Gareth.manning@gleanerjm.com
