Jamaica looks at cat bonds, other tools to confront disasters
Jamaica needs to develop a more comprehensive set of contingency measures to confront natural disasters, including contingent credit facilities at multilateral institutions, catastrophe bonds and financing for climate change adaptation and disaster mitigation efforts, finance minister Nigel Clarke said.
"Natural disaster can set small countries back for years. Jamaica has done too much, made too many sacrifices to leave us completely exposed in a post-IMF program environment," Clarke said in a keynote speech at a meeting of Caribbean Association of Insurance and Financial Advisors (CARAIFA), reported the state news service.
The minister said the policy, to be drawn up with technical assistance from multilateral partners, would be part of a 10-year plan.
"Today, and for the next 18 months, Jamaica is in a precautionary standby arrangement with the IMF," said Clarke. "[With this] we have access to significant resources should we need them. As we move towards the end of this program with the IMF, with the commensurate standby line of credit that it offers, it is important that we consider measures that can moderate the fiscal impact of natural disasters."
Clarke argued that achieving and maintaining economic independence means Jamaica "must take account of our realities" and "part of this reality is that based on our location we are subject to natural disasters, and the incidence of these have been increasing over time."
That reality was made dramatically clear in 2017 with the impact of hurricanes Irma and Maria, which devastated multiple territories, including Puerto Rico and Dominica. Aon Benfield recently estimated the two storms caused US$95bn in economic damage in the Caribbean and roughly US$35bn in insured losses.
Clarke outlined the program, labeled the Public Financial Management Policy for Natural Disaster Risk, saying it would consider "our natural disaster-related fiscal exposure, the pros and cons of various solutions available, our resource envelope and existing literature."
The policy "will improve understanding of fiscal risks of natural disasters and recommend appropriate public financial management for natural disaster risk, including the implementation of various financing strategies," he added.
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