Hon Kurt Tibbetts Leader of Government Business

By Tad Stoner
tad@caymannetnews.com

The Sisters Islands may have to buy their own insurance policy, independent of the Cayman Islands, from the Caribbean’s natural-disaster fund to guarantee future protection from hurricanes and earthquakes.

At the same time, government is pondering the implications of leaving the Caribbean Catastrophic Risk Insurance Facility (CCRIF) altogether, although Ministers have said they would prefer a disaster-insurance policy better tailored to local needs.

“Cayman Brac and Little Cayman are already covered under the Cayman Islands’ policy,” Marsha Smith, CCRIF public relations director, told Cayman Net News.

To guarantee a payout for disasters such as Hurricane Paloma, she said, “they’d have to have their own insurance policy and their own premium. They’d be the 17th member,” of the regional insurance group, she said, alongside such countries as Jamaica, Dominica, St Lucia and other CARICOM nations.

Ms Smith was unable to estimate either the CCRIF entrance fee - equal to one year’s premium - or the annual payment that Cayman Brac and Little Cayman would need to make, however.

“The premium is determined by the amount of risk, and someone else makes the judgement,” Ms Smith said, citing the Oakland California-based EQECAT, a subsidiary of Houston’s ABS Consulting, which does “state-of-the-art engineering analyses, practical loss-control measures and innovative risk-transfer options,” according to company literature.

Nonetheless, she said, the CCRIF’s minimum policy was for a one-in-15-year event, while Category 4 Paloma, which hit the Sister Islands on 8 November, had been adjudged only a one-in-12-year event, automatically disqualifying both Cayman Brac and Little Cayman for a payout - unless the CCRIF ultimately agrees to a specially tailored policy.

“Actually, it might not go as far as having to get their own policy; if it wanted something, perhaps a separate policy could be designed,” Ms Smith said, “but they are covered under the Cayman Islands.”
In any case, a discrete Sister Islands policy would require the approval of the entire 16-member CCRIF group and its board of directors.

“In order for the CCRIF to cover individual parts of a single sovereign territory, it would need board approval, which would come only after the general membership of CCRIF signalled their support,” Ms Smith said.

Cayman, one of the original February 2007 members of the CCRIF, has paid the facility US$6 million, its entrance fee and two annual US$2 million premiums, for protection against a one-in-20-year event.

Michael Nixon, Senior Assistant Financial Secretary for Financial Management, and leader of talks with the CCRIF, told a national-TV audience on Thursday that if Paloma’s 145 mile per hour winds had hit Grand Cayman, the fund would have paid tens of millions of dollars.

“Based on our discussions with the CCRIF, we’d be looking at a payout of $40 million if Paloma had passed over Grand Cayman with those wind speeds,” he said.

Leader of Government Business Hon Kurt Tibbetts said Cabinet would meet Simon Young, head of CaribRM, the CCRIF’s Facility Supervisor, on 12 December, to seek relief.

“We will look at the geographical location of Grand Cayman with respect to Cayman Brac and Little Cayman, and see if there is a way to massage the policy for Cayman Brac and Little Cayman,” he said, reflecting widespread dismay about the lack of payment.

“The facility doesn’t serve the entire purpose we would have hoped it would serve,” he said. “We will have to make some decisions whether we want to continue or do something else.”

Speaking later to Cayman Net News, however, Mr Tibbetts said he would not comment on whether the Cayman Islands would leave the CCRIF “until we have those discussions”.

Last week Mr Tibbetts offered a “broad ballpark” Paloma-damage estimate of between $15 million and $20 million for the Sister Islands.

One local insurance official called it “madness” for Cayman to leave the CCRIF. “[The policy] was designed for something like a hit with a torpedo right in the middle of the ship,” he said. “This was more like a hit with a missile in the bow.”

Cabinet Minister Hon Alden McLaughlin agreed: “It would be a mistake to throw away the policy because if Paloma had been a few more miles to the left, Grand Cayman would have been hit. The government has the wherewithal to manage Cayman Brac and Little Cayman because the damage is not as great as in Ivan.

“If Grand Cayman had been hit by Paloma, you’d be praising God [for the insurance] because there would been hundreds of millions of dollars in damage,” Mr McLaughlin said.

Ms Smith explained that Cayman Brac and Little Cayman had less weighting in the policy than Grand Cayman because they produced only 15 percent of the Cayman Islands economic activity, and supported only a modest government infrastructure.

“The CCRIF is not a cure-all,” she said. “Its mission is simple: to provide liquidity to a member government after they are hit by an earthquake or hurricane so catastrophic that they cannot carry out government functions - not the case with Cayman since most economic and government activity is carried out in Grand Cayman.

“It’s understandable for people to be upset when they can’t make a claim on an insurance policy, but it is only reasonable to expect the policy to provide payouts only when the conditions agreed to by all parties, our member governments included, are met,” she said.