Cedric Stephens | Clear and present danger of climate change for Jamaica, insurers

Today’s column begins with a shout-out aimed at GK General Insurance. The company is now 40 years old. It marked this milestone with a supplement in this newspaper.

Full disclosure: I have long been a fan of former GK General managing director and now CEO of GraceKennedy Financial Group, Grace Burnett. More recently, Grace introduced me to the insurance and investment division’s Chief Operating Officer Steven Whittingham. He is one of a new group of insurance leaders who are directly involved in the development and execution of GKI’s business strategy.

The celebratory messages for GK General from the prime minister, opposition leader, executive director of the Financial Services Commission and the Insurance Association of Jamaica president were noteworthy in what was emphasised and what was left unsaid. Absent from the six messages that I read was any reference to or chest-thumping about the company’s financial results – even from the Group CEO.

Many of the words they used were like those that are often found here most weeks. Was it good PR or evidence of the company’s commitment to its motto? Objective measures of the company’s performance as perceived by its customers over four decades, and as reported in independent surveys, would have helped to buttress the words of congratulations.

PM Holness, despite the many demands and complexities of his job, and the failing COVID-19 grade assigned to him by some pundits, revealed to me that he has a keen understanding of the role of some risk-takers like GKI in this society. His use of words like efficiency and transparency and “products to ease the difficult transitions in customers’ personal and business lives” were mixed with gentler expressions like comfort and assistance.

In contrast, letters emanating from insurers’ claims departments – life and non-life – seldom, from my experience, display any compassion or reflect an understanding of customers’ difficult transitions. Terms like those used by the PM, to quote the Association of British Insurers, boost customer trust, enhance insurers’ reputation and increase insurance penetration when followed up by timely action.

Climate extremes

Extreme weather events are becoming increasingly common, in Europe and worldwide, says the New York Times. “The deadly torrential rain in Europe this summer was considered a one in a 400-year event; in China, over 20 inches of rain fell in just two days; New York City set records for an hour’s rainfall as a result of Hurricane Ida, setting off flash floods that killed dozens of people in the region, while at the same time, the drought-stricken American West is ablaze,” it reported.

Excluded from this list are two significant events in our neighbouring island of Hispaniola. Haiti was struck by a 7.2 magnitude earthquake on August 14 and caused the loss of over 2,000 lives. It was followed two days later by Tropical Storm Grace. Both events occurred while the country was still being ravaged by COVID-19. Locally, Tropical Storm Ida was said to have affected the livelihoods of about 10,000 persons in the farming community.

Munich Re, one of GKGI’s reinsurers, calls climate change “one of humanity’s greatest challenges. It is predominantly the result of human activity, is real and has a major influence on weather-related natural disasters. It can dramatically alter a region’s risk situation in terms of severe storms, thunderstorms, floods, or droughts. A thorough understanding of climate change is essential for an insurer’s risk management”.

Swiss Re, another of GKGI’s principal reinsurers that Grace mentioned, says that “climate change poses the biggest long-term threat to the global economy. If no mitigating action is taken, global temperatures could rise by more than 3°C and the world economy could shrink by 18% in the next 30 years”.

Knowledge deficit

Last Tuesday, President of the United States Joe Biden warned Americans that “Hurricane Ida’s lethal destruction was the sure sign of a nation and world in peril from climate change, and drastic action would be needed to prevent extreme weather patterns from worsening. Climate change poses an existential threat to our lives, our economy, and the threat is here”.

Given the clear and present dangers posed by climate change to Jamaica and its insurance industry, and to what I suspect is the ignorance that exists in the society about things like tropical storms and hurricanes and the effects that climate change will have on these phenomena, I was very disappointed that the contributors to the GK General supplement omitted to discuss the subject – especially when the supplement was planned for publication in the middle of what is predicted to be an active hurricane season.

Notably absent from the supplement, also, was any reference to the range of threats posed by cyber risks. David Jessop calls them an unavoidable regional priority for the Caribbean.

More important, none of the GK officials who wrote in the supplement offered any clues about what their company is doing to help organisations and individuals manage these risks. These shortcomings notwithstanding, GKGI should be congratulated on its consumer-centric approach to doing business.

- 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 bsuiness@gleanerjm.com