Archive for December 7th, 2008

Minister says CCRIF policy is still good

Minister says CCRIF policy is still good

| 07/12/2008 | 6 Comments

(CNS): The Leader of Government Business, Kurt Tibbetts, has confirmed that the Cayman Islands will not receive anything from the Caribbean Catastrophe Risk Insurance Facility, a regional insurance policy which the government joined in the wake of Hurricane Ivan. However, Minister Alden McLaughlin has said it does not mean that government should cancel the policy because if the storm had hit Grand Cayman the country would have been in desperate need of the $40million that CCRIF says would have been paid.

Despite the fact that the wind speeds were high enough to trigger a claim, because Cayman Brac is neither the centre of economic activity or where government assets are located there will be no payout. While there has been much controversy surrounding the claim refusal, Minister McLaughlin noted that it did not mean that the government should cancel the policy.

“If Hurricane Paloma had not changed course we would be praising God that we had this policy,” he said, explaining that the government would then have received a substantial payout and the country would have needed it. “So, while Cayman Brac may have been seriously hit, the reality is less than 2000 people and a very small percentage of our economic activity and government assets have been affected.”

He explained that the parameters of the policy were aimed at the jurisdiction being able to rebuild its economy as quickly as possible on a macro scale. “With more than 96% of the population over here we can manage the Brac situation. This is not the dilemma that people are describing.”

Michael Nixon from the Portfolio of Economics and Finance said the CCRIF had confirmed that if Paloma had hit Grand Cayman with the same intensity, regardless of the damage, the government would have received around US$40 million. McLaughlin said the important issue now was for all the countries involved to look at whether everyone is happy with the trigger and how it works. “Let me go out on a limb, “ McLaughlin added. “It will be a huge error to throw away this policy over the failure of this claim onthe Brac. Had Paloma been just a few miles in our direction things would have been very different.”

The Leader of Government Business confirmed that the primary purpose of the policy was always to provide the government with a cash payout to assist with recovery and redevelopment from a macro-level. So it was always possible that if any of the member countries were badly effected in just one area by a hurricane, it would not necessarily trigger a payment because losses would be localised. He said Jamaica was refused a claim after a hurricane badly damaged a low populated and economically inactive area, whereas Turks & Caicos did receive a payout following a hurricane strike earlier this year as it hit government assets.

“The CCRIF is part of an overall diversified catastrophe risk management strategy to provide the country with a high degree of protection from the financial risks associated with our exposure to natural catastrophe hazards,” Tibbetts said, adding that government is using a combination of risk transfer, retention and reduction methodologies. “The main financial risk transfer mechanism used by the government is its Property Insurance Programme, which provides all-risk insurance coverage against physical loss of major government buildings and assets.

He explained, however, that even with such a comprehensive insurance programme in place, it is impossible to provide total financial risk transfer for government’s assets. The results of the CCRIF assessment on the claim were currently being audited by the accounting firm of PriceWaterhouseCoopers (PWC) and that report would be issued shortly, he said.

Cabinet would be meeting with officials from the CCRIF next week to discuss the CCRIF and possible enhancements to the programme coverage, and part of the discussions would involve geographic location and the fact the Cayman government might need to massage the policy, said Tibbetts, but he confirmed that the CI government was well able to take care of the Brac situation.

Government would be introducing a duty waiver for appliances and furniture on the Sister Islands for the next six months, he said. “Consistent with the decision made following the passage of Hurricane Ivan to grant concessions which assisted hurricane recovery efforts, on Tuesday Cabinet approved import duty concessions for Cayman Brac and Little Cayman on furniture and appliances, such as stoves, refrigerators, washers, dryers, dishwashers, microwaves and toasters,” Tibbetts said. “The normal duty rate on these items of 20% will be waived, effective 1 December 2008 through to 31 May 2009. These concessions are available to individuals as well as to businesses.  At that time we will review the waiver to see if an extension is needed.” He also noted that government would be watching prices on the Brac closely and ensuring the local businesses reflected the duty break in their prices to local consumers.

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