Cedric Stephens | Disaster risks are accelerating

ADVISORY COLUMN: RISKS & INSURANCE

A magnitude 7.7 earthquake struck about 80 miles from Jamaica on January 28 and was felt in the Caribbean and Miami.

“A tsunami of 0.4 feet was recorded in The Cayman Islands at George Town, but no tsunami was observed at Port Royal, Jamaica; or Puerto Plata, the Dominican Republic. There were several aftershocks, including one, the US Geological Survey said, that had a magnitude of 6.1,” CNN reported on January 29.

On March 10, according to the Ministry of Health and Wellness, the island recorded its first case of COVID-19 in Kingston. A Jamaican female who had travelled from the United Kingdom, presented on March 9 to the local authorities. The next day, it was confirmed that she had tested positive.

Since that time, according to the International Monetary Fund, the local economy – like most economies around the world – has been “significantly impacted by the global pandemic”. The country’s gross domestic product is projected to contract by “over 5 per cent” this fiscal year. No one knows how long the pandemic will last.

Two risk events occurred while this article was being written. One was a 4.8 magnitude earthquake that struck the island on August 26 – during the current hurricane season. The other, while it posed no threat, was relevant to the country. Hurricane Laura was barrelling towards the states of Texas and Louisiana as a Category 4 storm. It had 150 mile-per-hour winds and a massive storm surge.

The New York Times said that it was one of the most powerful hurricanes to ever hit the United States. These occurrences, which took place within days of each other, during a pandemic, highlight the many risks that this small country and its inhabitants have faced during an eight-month period in one year.

This newspaper reported on July 19 that Finance and Planning Minister Dr Nigel Clarke has put the Planning Institute of Jamaica in charge of developing a feasibility study on unemployment insurance.

The idea of unemployment insurance “has been tossed around for years as a safety net for workers who are separated from their jobs through cuts or other changes in fortune and need short-term support. COVID-19 has given the issue more urgency", the story said. A COVID-19 Economic Recovery Task Force has estimated that the lockdown that resulted from the pandemic “may end up at around 100,000” job losses.

If we are looking at the feasibility of UI for workers generally, what about an insurance plan for our farmers? The agricultural sector, according to Index Mundi, contributed seven per cent to Jamaica’s GDP and 16.1 per cent to its labour force in 2017.

Farming is steadily becoming more business-oriented, climate smart, and better at risk management with the implementation of water harvesting, fodder conservation, greenhouses, drip irrigation, and hydroponic systems on large- and small-scale operations. Technology has advanced with data on climate, satellite mapping, and correlation to production.

One of the direct results of COVID-19 is that some entities in the public and private sectors have begun to pay more attention to the identification of risks that have the potential to cause disruption of their operations and to the development of strategies to manage those risks before they occur.

Some experts estimate that losses and damage caused by natural catastrophes − hurricanes, tropical storms, floods, bush fires, and drought − generated losses in the island’s agricultural sector of US$165 million during the period 1994 to 2010. This amount is equivalent to US$11 million per annum.

A 2013 Ministry of Industry, Commerce, Agriculture and Fisheries paper titled Food and Nutrition Security Policy, argued that the country’s food and nutrition security is also threatened by annual hurricanes, drought and floods, and the spectre of climate change. Significantly, earthquakes and global pandemics were not on the list.

“These cyclical natural events,” the report said, “have increased in intensity over the recent past, thus making Jamaica more prone to temporary food insecurity. Given the diverse ways in which climate change can affect food security, agribusiness entrepreneurs, including farmers, as well as policymakers, should focus on a number of key issues.

“Firstly, they should consider ways to reduce greenhouse gas emissions (mitigation measures) to lessen future effects of climate change. This can include activities such as the use of sustainable (both traditional and cutting-edge) technologies to reduce the reliance on imported inputs, and increasing the use of renewable energy, e.g., solar, wind, geothermal, and biofuels in all sectors, but particularly in the agricultural sector.

“Secondly, there should be a focus on the development of early warning systems (together with crop and livestock insurance schemes), which would be able to forecast periods of shortages, particularly for food production and the onset of extreme events.

“Thirdly, focus should be on finding ways in which Jamaican farming systems can adapt to climate change, particularly in reducing farmers’ vulnerability.”

Seven years have passed, and to the best of my knowledge, there has not been a policy response by MICAF in the form of a crop insurance plan to protect members of the hard-working farming community.

Why hasn’t there been a change in the status quo? Shouldn’t the proximity of the 7.7 magnitude earthquake event in January, which was quickly followed by the impact of the COVID-19 pandemic and the economic and other disruption that it is still causing, coupled with another record-breaking hurricane season, have spurred us into developing a solution to better manage the many risks that bedevil Jamaica’s agricultural sector?

According to Swiss Re’s group chief economist Jerome Haegeli: “Insurance is a key tool to help households to reduce their financial vulnerability in disruptive environments". Shouldn’t this matter be placed on the new government’s agenda after the general election?

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com