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While economies around the globe feel the impact of natural disasters and climate change, climate risks are not distributed equally. Some nations are more exposed and vulnerable than others, with protection gaps causing the impact of natural disasters to increase over the long term.
In response to this global challenge, the Global Shield against Climate Risks was launched in November 2022. This initiative, developed jointly by the G7 and the Vulnerable 20 Group of Finance Ministers (V20), represents 58 climate-vulnerable economies comprising a population of approximately 1.5 billion people.
Caribbean island countries are included in this group of exposed nations. Tropical cyclones and earthquakes are the most recurring natural disasters regionally. Each year, severe winds and heavy rainfall result in flooding and landslides.
According to the UNDP, the Caribbean archipelago suffers yearly losses from storm damages equivalent to an average of 17% of their GDP. Natural disasters occur more frequently and cost more in the Caribbean than elsewhere, as reported by the IMF. In the instance of Dominica, Hurricane Maria is estimated to have cost the island 225 per cent of its GDP, whereas the cost of hurricane damage to Grenada in 2004 was assessed at 200 per cent of GDP.
The Caribbean tectonic plate borders the North American, the South American, the Nazca, and the Cocos plates, causing significant seismic activity. Since the early 2020s, nearly 50 earthquakes recording a magnitude of at least 5 Mw have shaken the area. The 7.2 Mw earthquake in Haiti on 14 August 2021 is one of the deadliest in recent history.
According to the V20, 98% of the population does not have access to financial protection within vulnerable economies. This places them below the resilience threshold, resulting in slow and laborious recovery in the wake of natural disasters. Direct and indirect impact are commonly still felt years after an event.
In the Caribbean, 70-85% of businesses are Micro, Small or Medium Enterprises which contribute to more than half of the region’s GDP, according to the Caribbean Development Bank. Generally, SMEs are the businesses most affected by natural disasters, due to their limited financial and technical resources and lack of access to credit. Preparedness and protection are therefore vital to facilitate a rapid recovery process, minimize economic downturn and increase sustainable growth.
While parametric insurance schemes for governments (CCRIF) and parametric risk transfers for large corporations and microinsurance offerings have evolved in the Caribbean in recent years, the MSME market segment is still underserved.
Parametric NatCat Rapid Recovery insurance products have the capacity to play a key role in strengthening climate resilience. Rapid payouts, without long-winded claims processes, enable MSMEs to stay afloat and recover more quickly. “The more frequently natural disasters occur in a certain region the more prepared the local and national economies should be. Rapid recovery from natural disasters is key,” says CelsiusPro CEO Mark Rueegg. “We look forward to provide support in closing the protection gap in the Caribbean.”
In 2023, CelsiusPro has become a member of the Insurance Association of the Caribbean (IAC). “We look forward to strengthening our ties with this region of the world to better understand their expectations and needs,” says Mark Rueegg. At the 41st Annual Caribbean Insurance Conference held early June, Mark Rueegg will be one of the speakers addressing the topic of vulnerability and resilience.