Governments of countries on the frontline of climate change do not have the fiscal space to fund resilience building off their balance sheets.
And so, they need new insurance instruments, broader funding avenues, new governance structures, and new arrangements between nations, CARICOM and the wider region as well as between the public and private sectors.
This was made clear by Minister in the Ministry of Economic Affairs and Investment, Marsha Caddle, as she addressed a colloquium with the theme Insurance in the Age of Climate Change, held at the Lloyd Erskine Sandiford Conference Centre on Tuesday.
Minister Caddle noted that while climate change up to five to 10 years ago was perceived as a slow onset risk related to creeping increases in temperatures and sea levels, a completely different picture was emerging today.
She observed that there were a clear group of countries that were on the frontline of climate change – low-lying coastal regions and small island developing states.
“At that frontline lies a tipping point beyond which the loss and damage that we are talking about is colossal, increasing in frequency and at a higher correlation with other kinds of loss and damage. Even the category of events that we thought might continue to affect us incrementally, like coastal erosion, is happening much faster than we could have imagined.”
She identified Dominica, Vanuatu, Fiji, Grenada and the Bahamas as islands in the Caribbean and the Pacific that had suffered major loss and damage as a result of storms, rising sea levels, sea surges and flooding.
“We don’t need to think too long to realize that whatever is the level of coverage to address this, it is unaffordable, especially given the fact that while these countries did not contribute to climate change, we are the ones who are most burdened by it,” Ms. Caddle stated.
Noting that private insurance worked best when there was an unpredictable event that could be pooled together with other uncorrelated, unpredictable events spread across time, this was not, however, the case here, she said.
“A known risk, as we have, that is increasing in correlation with other risks, as we have, causing extreme loss and damage when realized, and rising in loss and frequency, is not insurable through the collection of tolerable premiums, and when I say tolerable premiums, I mean affordable.”
She pointed out however that although total loss and damage related to climate change was uninsurable, insurance could play a critical role in the solutions.
“We are looking at a couple of things at the same time. One is immediate liquidity that is needed on the one hand, but the other is ex ante resilience building and what resilience looks like.
“We’re not just talking about building stronger, thicker walls and larger structures, but we are talking as well about building in more flexible ways, building collapsible pieces of infrastructure such as some of the bridges that we have seen in some parts of the world.”
Barbados, Minister Caddle, disclosed, was examining building codes and exploring how to build for a future with greater climate risks. “It is not just the traditional building back better approach, but it is building in more creative ways and it is making sure that we are looking for real, current and future solutions,” she stressed.