Harness the power of catastrophes

Editorial

SMALL Island States, including the Pacific,

have been pushing for the develop ment of a Vulnerability Index for as long as can be remembered.

Their smallness, it is argued, means that they are vulnerable to changes in ways that other countries are not. For this reason, they argue they should not be treated the same as other developing countries when it comes to aid and international obliga tions. Now, the World Bank has recognised this vulnerability.

Small states, it agrees, are more vulnerable to the impact of a single natural disaster because of their smallness and lack of economic diver sification.

But instead, of providing a hand out, the Bank has proposed a hand-up - a scheme that would see the Pacific helping itself, rather than being helped from outside.

This Small States Regional Cata strophe Insurance Programme seems so logical, it is absurd that it hasn’t been proposed before.

In the simplest of terms, govern ments, insurance companies, and multi-lateral financial institutions set up a fund - which could apply between a few countries or all Pacific countries - which is used to provide reinsurance for island insurers.

Because it is subsidised by govern ments and funded on low interest by the multi-laterals, this would allow insurance companies to reduce their premiums, thus allowing more people to get insured. The combination of increased markets and better reinsur ance costs would mean that the insur ance companies will not be arguing.

The wider coverage and lower costs mean that catastrophes may not be as

catastrophic in the islands.

Insurance is an essential element of business anywhere in the world, and one most often taken for granted.

But in the Pacific, as it is in the Caribbean, insurance is often the pre rogative of the rich and well-to-do, while anyone else, small business included, is left grabbing at straws during a catastrophe.

With such a scheme in place, gov ernments would not have to worry about natural disasters interfering with an investor’s decision to stay or not. Indeed, it would not have to worry about spending too much money or getting unplanned loans when a catastrophe strikes.

There is no doubt that the Cata strophe Insurance scheme will have to be carefully investigated and planned, but, perhaps, on this one, the region may be on to something. ■