Cedric Stephens | Insurers not contributing enough to nation-building

Singapore has a low exposure to natural disasters. It is one of the least disaster-prone countries in the world, according to experts. Its location in Southeast Asia provides natural protection from many of the most destructive disasters like hurricanes, tropical storms, earthquakes, volcanic eruptions, and tsunamis.

This contrasts with Caribbean islands like Jamaica which are highly vulnerable and whose centuries-old historical records confirm this fact. Singapore, however, still faces certain natural and climate-related hazards like flash floods and rising sea levels to which islands like ours are also exposed.

The Insurance Development Forum, IDF, is a London-based public-private partnership. It brings together leaders from governments, the insurance industry, international organisations, and development agencies to help build resilience against climate and disaster risks in vulnerable economies, particularly developing countries.

Earlier this month, IDF announced a strategic partnership with the Bridgetown Initiative aimed at accelerating the integration of insurance into the international financial architecture as a key part of the toolkit for enhancing resilience in emerging markets and developing economies.

The Bridgetown Initiative is a reform-oriented proposal championed by Prime Minister of Barbados Mia Amor Mottley. It is aimed at overhauling the global financial architecture to better address the challenges of climate change, poverty, and debt distress, particularly for developing countries and climate-vulnerable nations.

The initiative’s mission is create a fairer, more responsive international financial system that enables developing countries to recover from climate disasters, finance climate adaptation and mitigation, and address debt crises without compromising development goals.

IDF emphasised four points in the press release announcing the Bridgetown Initiative, which bears the name of Barbados’ capital city:

• Climate-related catastrophes are increasing in frequency and impact. Nations that are most vulnerable to disasters bear severe economic costs. For the least developed countries, the impact is 10 times more than the richest countries as a share of gross domestic product;

• When natural disasters occur, development plans often need to be postponed, and development waste is created;

• Strengthening physical and economic resilience is essential not only to withstand the impact of disasters but also to unlock greater investment and support critical development, resilience, and growth agendas; and

• New public-private partnerships seek to enable insurance as a central enabler in the global response to climate natural disaster risks with the goal of leveraging the full capabilities.

The Government of Jamaica’s dissemination of information about its plan to strengthen disaster preparedness during the 2025 hurricane season via its media arm, Jamaica Information Service, is evidence that policymakers see and understand the big picture. The prime minister’s recent statement affirmed this.

“Our approach includes strengthening national institutions, and legislations, investing in science, technology and early warning systems, building capacity at community level, aligning the national framework with climate resilience, and ensuring that disaster risk reduction is cross cutting – touching housing, education, health, energy, and the environment,” PM Dr Andrew Holness said.

Insurance, notably, was omitted from the cited examples.

Lee Kuan Yew, the father of Singapore, would, assuming he faced similar challenges to those of former and current Jamaican political leaders, have included developing and implementing a natural disaster risk strategy among the basics that were listed in Part I of Lee Kuan Lee’s memoirs, From Third World to First: The Singapore Story -1965-2000.

JIS’ June 23 report included a short paragraph about the key role that insurance can play in helping to build economic resilience.

Statistics and information analyst at the Caribbean Regional Fisheries Mechanism, June Master, shared disaster preparedness tips for fishers during the current hurricane season. One of the steps she recommended, was to obtain insurance coverage to ensure protection and peace of mind.

The reality on the ground is quite different from what happens in theory. Insurance for fisherfolk and farmers is limited. Secondly, a trust deficit, among other things, exists between consumers and prospective consumers and the insurance industry.

A 2014 study, for example, identified several challenges that have contributed to these market failures. Among them were supervisory and regulatory obstacles; the absence of ‘carrots’ to incentivise providers to offer products; the failure of providers to recognise business opportunities, innovate, and offer products with value to promote demand; and the non-implementation of strategies by most providers to foster trust by protecting consumers and making sure that they will be empowered to use the products they purchase.

There is evidence to support the findings in the previous paragraph. One newspaper reported recently about the launch of a product to protect farmers in 2021. Four years later, the take-up was estimated at only 1,000 out of a population of over 200,000 farmers who collectively contributed about eight per cent to GDP. Despite the structural problems that were identified 11 years earlier, the portfolio ministry, according to a recent report, allocated $7.5 million to assist 5,000 farmers to sign up without finding solutions to the underlying problems.

The local insurance industry is owned by local and regional entities that are part of the Caribbean’s financial architecture. There is little evidence that the owners and managers who run these enterprises share the vision that Prime Minister Mottley articulated in her country’s capital three years ago.

Additionally, they do not appear to have taken concrete action to address the challenges that climate change, poverty, and debt distress, pose to developing countries and climate-vulnerable nations in the Caribbean.

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 or business@gleanerjm.com