As if worrying about the average cost of hurricanes on a yearly basis was not enough for the storm-prone Caribbean, a new report claims that extreme weather could dramatically increase the average yearly cost caused by the massive storms. A study by the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and Swiss Re claims that the effect on hurricanes from climate change could cost Caribbean nations up to 9% of annual GDP by 2030 if these countries fail to act. “Developing countries can reduce local climate risks by combining prevention and risk transfer measures,” said Andreas Spiegel, Swiss Re’s senior climate change advisor.
“CCRIF shows how climate risks can be transferred away from public budgets to the commercial insurance market, thus pre-financing disaster recovery efforts.” There are also other, more affordable risk management measures that many islands are not implementing. The Cayman Islands, for instance, could cost-effectively avoid “up to 90% of expected losses” by implementing risk management measures such as constructing sea walls and enforcing building codes. On the other hand, for places such as Dominica, implementing such risk management measures can avert only 2% of the calculated loss.
To address the remaining risk, the island’s government must turn to insurance.