Ryan Ba­choo

Lead Ed­i­tor-News­gath­er­ing

ryan.ba­choo@cnc3.co.tt

There is a meme cir­cu­lat­ing on the in­ter­net that says, “If you don’t be­lieve in cli­mate change, your in­sur­ance com­pa­ny does.”

The wild­fires in Los An­ge­les have reignit­ed the bat­tle be­tween in­sur­ance or­gan­i­sa­tions and home­own­ers, push­ing the is­sue back in­to the head­lines. And while that cat­a­stro­phe seems to be a world away, there are far-reach­ing con­se­quences that will in­evitably reach the doorstep of peo­ple in T&T, as well as the Caribbean.

David Richard­son, who is a se­nior re­search fel­low at The Aus­tralia In­sti­tute, ex­plained in an ar­ti­cle last month, “The in­creas­ing num­ber, scale and in­ten­si­ty of nat­ur­al dis­as­ters like bush­fires, cy­clones, and floods—due to our chang­ing cli­mate—is a glob­al phe­nom­e­non that will im­pact in­sur­ance pre­mi­ums around the world.”

There will be a rip­ple ef­fect from top to bot­tom. Rein­sur­ers, which are glob­al com­pa­nies that pro­vide fi­nan­cial pro­tec­tion to in­sur­ance com­pa­nies, will in­crease pre­mi­ums to cov­er their loss­es from nat­ur­al dis­as­ters. Your in­sur­ance com­pa­ny will pass that cost on to you. Such a sce­nario is a ma­jor cause for con­cern.

Some home­own­ers in flood-prone ar­eas such as Pe­nal, Debe, Mar­aval and Diego Mar­tin may not be able to af­ford the high­er pre­mi­ums, and when they’re not cov­ered, they will be left vul­ner­a­ble to floods, and re­cov­ery will be very chal­leng­ing.

“It’s cli­mate in­jus­tice,” said Dean Ro­many, who cur­rent­ly serves as pres­i­dent of the As­so­ci­a­tion of Trinidad and To­ba­go In­sur­ance Com­pa­nies (AT­TIC).

He fur­ther ex­plained to the Sun­day Guardian that while pre­mi­ums will go up, some home­own­ers will have to pay more than oth­ers.

He said, “What you have is a rate for a home in Trinidad. Let’s say the av­er­age rate for a build­ing is four dol­lars per thou­sand (just a fig­ure for ed­u­ca­tion­al pur­pos­es), and then you have ar­eas that are prone to flood­ing like Pe­nal, Diego Mar­tin and parts of San Fer­nan­do; they may pay five dol­lars per thou­sand be­cause of that flood-prone ex­po­sure that they have.” Ro­many said this was a risk ad­just­ment be­cause in­sur­ance com­pa­nies an­tic­i­pate they will have to pay out more to these ar­eas than oth­er parts of the coun­try.

With the LA wild­fires, in­sur­ers’ loss­es could climb north of $US30b, forc­ing in­sur­ance com­pa­nies to look to­wards their rein­sur­ers for help.

With just one month in­to the year and 11 months still to go, rein­sur­ers could in­crease pre­mi­ums for the Caribbean re­gion as ear­ly as four months be­fore the start of the wet sea­son.

Ris­ing costs, shrink­ing cov­er­age

How­ev­er, in­ter­na­tion­al­ly recog­nised ex­pert on cli­mate change Steve Max­i­may warned that even for home­own­ers who can af­ford the in­creased pre­mi­um, their in­sur­ance may not want to sell them cov­er­age. “World­wide, in­sur­ance com­pa­nies have been lit­er­al­ly back­ing away from cov­er­ing some of these cli­mate haz­ards, and these haz­ards run the full gamut from wild­fires in LA to flood­ing in Va­len­cia, and if you bring it clos­er to home, hur­ri­canes in the Caribbean,” Max­i­may told the Sun­day Guardian last week.

Last Ju­ly, rough­ly 3,600 poli­cies in Los An­ge­les were dropped by the in­sur­ance com­pa­ny, State Farm. There are sim­i­lar sto­ries in Flori­da, and Ro­many said it has al­ready be­gun creep­ing in­to the Caribbean.

“You al­ready have Lloyd’s say­ing that they are not do­ing busi­ness in the US Vir­gin Is­lands right up the Caribbean. You al­ready have a num­ber of multi­na­tion­al rein­sur­ers say­ing that we are not go­ing to pro­vide more ca­pac­i­ty for the Caribbean, in­clud­ing Trinidad and To­ba­go.

“Re­mem­ber, val­ues are in­creas­ing, so where are we go­ing to get the rein­sur­ances from?” he asked.

Ro­many, who al­so serves as pres­i­dent of Guardian Gen­er­al In­sur­ance Lim­it­ed (GGIL), said this was where lo­cal in­sur­ance com­pa­nies have to en­tice rein­sur­ers with strong pack­ages, which can in­clude high­er pre­mi­ums to be paid by res­i­den­tial cus­tomers so that rein­sur­ers could con­tin­ue be­ing in­ter­est­ed in T&T.

“It is bet­ter to have in­sur­ance de­mand well sup­port­ed by lo­cal in­sur­ance com­pa­nies and backed by the best rein­sur­ers in the world, even at the sac­ri­fice of pay­ing high­er pre­mi­ums,” Ro­many said.

In­sur­ance isn’t enough; Adap­ta­tion and mit­i­ga­tion in­vest­ments need­ed

Such sce­nar­ios, be they res­i­den­tial or agri­cul­tur­al, can leave peo­ple who are most vul­ner­a­ble to nat­ur­al dis­as­ters such as flood­ing in T&T with­out cov­er­age.

Max­i­may and Ro­many said this points to cli­mate in­jus­tice.

Max­i­may ex­plained, “It is just an­oth­er ex­am­ple of how cli­mate fi­nance ought to be linked to cli­mate jus­tice and just tran­si­tion, and there should be a re­duc­tion in terms of the mon­ey that comes to the re­gion as debt. The time for loans is long gone. What we need now is re­dress.”

He tout­ed the idea of cli­mate fi­nance be­ing in­vest­ed in in­sur­ance com­pa­nies, say­ing, “Every time the Green Cli­mate Fund or the Glob­al En­vi­ron­ment Fa­cil­i­ties of this world pro­vides the re­gion with a grant, as it per­tains to the cli­mate jus­tice is­sue—you are be­ing award­ed these grants be­cause it is their way of at­tempt­ing to re­dress the in­jus­tices the re­gion con­tin­ues to suf­fer—I’m say­ing if you can tie that to an in­sur­ance fa­cil­i­ty ... “In oth­er words, it makes no sense if a mul­ti­lat­er­al agency gives Trinidad $US50m if Trinidad is go­ing to take that mon­ey and buy ser­vices and goods from the same coun­tries that caused the prob­lem in the first place. To me, it would make more sense if that mon­ey went in­to a fa­cil­i­ty like an in­sur­ance-like fa­cil­i­ty so that the next time we have an is­sue—at least we have that mon­ey as an in­sur­ance back-up. In oth­er words, it could be used to fund CCRIF and agen­cies like CCRIF.”

CCRIF is the Caribbean Cat­a­stro­phe Risk In­sur­ance Fa­cil­i­ty, of which T&T is a mem­ber. Ac­cord­ing to its web­site, since its in­cep­tion in 2007, the fa­cil­i­ty has made 78 pay­outs to 22 mem­bers to­talling ap­prox­i­mate­ly $US390m.

CC­CRIF CEO Isaac An­tho­ny agreed with Max­i­may but said coun­tries must al­so do their part.

He added, “I agree that if there is a grant, some of that grant could be ear­marked to­wards in­creas­ing the cov­er­age of the coun­tries so that hope­ful­ly if they are im­pact­ed by an event, they will be able to get a much big­ger pay­out than what they had been re­ceiv­ing.”

How­ev­er, An­tho­ny un­der­scored that in­sur­ance is not the on­ly in­stru­ment, and there are oth­er things a coun­try should be do­ing. He point­ed to in­vest­ments in adap­ta­tion and mit­i­ga­tion.

“Re­gard­less of how much you mit­i­gate and adapt, there will al­ways be the resid­ual risk, and this is where loss and dam­age come in, and that is where in­sur­ance comes in as a very im­por­tant tool.”

Both com­ple­ment each oth­er, An­tho­ny added.

The im­pact on agri­cul­ture in T&T

The agri­cul­ture in­dus­try al­so faces an un­cer­tain fu­ture as it per­tains to in­sur­ance. Present­ly, there are lim­it­ed op­tions when it comes to crops and land be­ing in­sured.

Pres­i­dent of the Agri­cul­tur­al So­ci­ety of T&T (ASTT) Daryl Ram­per­sad, said that rough­ly 90 per cent of farm­ers in T&T are not in­sured. He ex­plained, “We do not have suf­fi­cient cov­er­age as it per­tains to the agri­cul­tur­al ac­tiv­i­ties to which we have in T&T. We do not have cov­er­age in crop farm­ing. We do not have com­pa­nies that are ac­tu­al­ly will­ing to cov­er crop in­sur­ance in T&T be­cause of the low-ly­ing ar­eas we have agri­cul­tur­al pro­duc­tion tak­ing place. The risk is too high.”

Ram­per­sad said an­oth­er fac­tor that needs to be tak­en in­to con­sid­er­a­tion is that farm­ers are self-em­ployed, and a prop­er cov­er­age pack­age can run any­where be­tween $300 and $1,200 per month.

“In most cas­es, a farmer can­not af­ford that. A farmer is a sole trad­er, and he is one who takes all his risks for him­self. There is a cost fac­tor that will de­ter a farmer from tak­ing out in­sur­ance in cer­tain ar­eas,” Ram­per­sad added.

As a start, the ASTT pres­i­dent said a more or­gan­ised struc­ture of agri­cul­ture in the coun­try was need­ed to per­suade in­sur­ance com­pa­nies to cov­er the sec­tor.

He added, “Un­til we can iden­ti­fy ar­eas that are safe for agri­cul­ture and mit­i­gate some of the risks that are in­volved, you are not go­ing to get the in­sur­ance com­pa­nies buy­ing in.”

As pre­mi­ums in­crease for the peo­ple of the Caribbean, some may be able to af­ford it, oth­ers will not and re­main un­cov­ered, while some won’t have ac­cess to pri­vate in­sur­ance at all.

This sto­ry was pub­lished with the sup­port of the Caribbean Cli­mate Jus­tice Jour­nal­ism Fel­low­ship, which is a joint ven­ture of Cli­mate Track­er and Open So­ci­ety Foun­da­tions.