The Government is putting strategies in place to better plan for and finance damage and losses resulting from natural disasters.
Among the measures is implementation of the public financial management policy for natural disaster risk, which will provide the country with funds in the event of a disaster.
It will include, among other things, accumulating fiscal savings in the Contingencies Fund and making contingent credit available in the event of a disaster; and implementing financing strategies such as catastrophe bonds or catastrophe-linked insurance.
“The idea is to have available to Jamaica, up to US$1 billion of non-budgetary emergency funding that can be available in the worst possible event and that is the strategic intent, the strategic direction,” explained Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke.
He was speaking at the launch of the website for the Seventh Regional Platform for Disaster Risk Reduction in the Americas and the Caribbean 2020 at the Spanish Court Hotel in New Kingston on July 10.
The Minister, in highlighting the importance of the policy, said that Jamaica’s pursuit of economic independence requires an institutional response to the financial risk of natural disaster.
He informed that earlier this year, the Government transferred a sum of $2 billion into the Contingencies Fund towards natural disaster risk coverage.
This is in keeping with a resolution moved by Dr. Clarke in Parliament in March to raise the ceiling of the Fund from $100 million to $10 billion.
The Contingencies Fund is provided for in Jamaica’s Constitution and was established under Section 13 of the Financial Administration and Audit Act to provide for unforeseen expenditure of any kind.
“The idea is, you put the fiscal savings aside on an annual basis as you can afford. You invest it prudently and you do so in markets that provide some degree of diversification from the risk that you are trying to protect yourself from, and you only draw down in the event of natural disaster.
“When you draw it down… it is through a budgetary process, so there is transparency on the drawdown itself and on how those funds are being used,” Dr. Clarke explained.
He further pointed to the Caribbean Catastrophe Risk Insurance Facility, which he noted “has the capacity to pay out significant sums if we have an event that triggers it”.
He noted, too, that Jamaica renegotiated last year with the Inter-American Development Bank (IDB) for a $285-million contingent credit claim.
In addition, he said that the Government is working with the World Bank to develop a catastrophe bond that will generate additional funding “to protect Jamaica from the worst possible natural disaster event… that can derail our fiscal trajectory”.
Dr. Clarke explained that the bond is an investable capital market instrument that will provide the Government with access to the resources that may be needed, in return for annual premium payments.
He noted that development of the bond requires a lot of “detailed modelling”, and the World Bank is providing technical support in this regard.
“I can say that our strategic efforts in this area have met on fertile ground… and I fully expect that they (World Bank) will assist us in this regard, with us obviously having some skin in the game and using some of our own resources to pay the premiums that are involved,” Dr. Clarke said.
Jamaica will host the Seventh Regional Platform for Disaster Risk Reduction in the Americas and the Caribbean from July 8 to 10, 2020 at the Montego Bay Convention Centre in St. James, under the theme ‘Building Resilient Economies in the Americas and the Caribbean’.