Cedric Stephens | Appropriateness of public-private partnerships for disaster risk management

Last week, the Jamaica Information Service, the Government’s news agency, featured the Disaster Vulnerability Reduction Project, DVRP, which is being implemented by the Jamaica Social Investment Fund.

I obtained an introduction to the JSIF’s Managing Director, Omar Sweeney, since I had not heard about the DVRP before. Regular readers know that disaster risk management is a topic I have written about many times – the last time being November 5 under the headline ‘Anodyne Disaster Response to Quake’. It is an important subject to citizens and the economy as the finance minister has confirmed in his articles published in this newspaper.

The DVRP, a US$30 million World Bank project, began seven years ago. Its goal is to strengthen the country’s disaster-management capacity. Mr Sweeney, according to the JIS, said that the project comprises hardware and software. These elements are designed to improve the country’s capacity, especially in vulnerable communities and vulnerable areas, and to offer better resistance to many of the effects of climate change.

He noted that Jamaica is among the most vulnerable countries to natural and man-made disasters. It is exposed to earthquakes, hurricanes, floods, and droughts. Physical assets are also exposed to fires. The DVRP was designed to improve the island’s capacity to manage and mitigate these risks.

Mr Sweeney listed the following institutions, areas, and communities that have benefited or will get help from the DVRP:

• The Jamaica Fire Brigade: Fire stations in Montego Bay, St James, Yallahs, St Thomas, and Port Maria, St Mary now ‘enjoy state-of-the-art facilities’ to enable them to carry out their duties.

• Big Pond/Myton Gully, Old Harbour, St Catherine: infrastructure investments to improve drainage and minimise the flood risk.

• Downtown Kingston: the construction of a coastal revetment (a structure designed by engineers), more simply a sea wall, to safeguard the corridor from continued erosion and the effects of storm surges in the Kingston Harbour. A similar project is planned for Annotto Bay, St Mary.

• The Earthquake Unit, University of the West Indies, Mona: Upgrading computer hardware, monitoring stations, software, and employee training in the Seismic Unit.

• The Office of Disaster Preparedness and Emergency Management (ODPEM): developing a National Risk Information Platform. It will include ‘all the risk information that ODPEM and the wider government can use to have evidence-based data in determining where people live, where building plans are approved and where roads and highways can be constructed.’

• The Bureau of Standards Jamaica: updating the National Building Codes, including the International Building Code, Small Residential Code, and International Fire Code.

The JIS report and, by implication, what was written about the JSIF were unsatisfactory. The reporter did not understand the scale of the island’s vulnerability problem and how the hazards threaten the lives and livelihoods of thousands across the island. The project was not discussed in the context of the country’s development and past hazards’ impacts on the economy. The experience, special skills, and expertise the JSIF brought to implement the DVRP were ignored.

The JSIF’s website describes its project development objective more comprehensively than the JIS. It is to “enhance Jamaica’s resilience to disaster and climate risks. DVRP is intended to support the Government of Jamaica in disaster risk management in the wider context of sustainable development. Activities to be implemented are intended to reduce disaster and climate vulnerability by making infrastructure more resilient, improve the capacity of government institutions, generate and use hazard and risk information to shape local and national development and assist the GOJ in managing its fiscal liabilities associated with disasters, and to work towards an ex-ante risk financing strategy”.

The JSIF website sourced World Bank-derived facts that provide context for the project. Not surprisingly, this information is absent from the websites of the Financial Services Commission, the entity that regulates the insurance industry, insurance providers that offer coverage against fires and natural disasters, the insurance lobby, the Insurance Association of Jamaica, and the ODPEM. This means that members of these organisations, whose functions are connected to national disaster risk management, do not have a broad understanding of the threats posed by natural disasters or climate change – they do not see the big picture.

Here are some key points from the JSIF website:

• The impact of disasters on Jamaica’s gross domestic product has increased during the past 25 years. Between 1990 and 2000, damage from disasters amounted to 12.6 per cent of GDP.

• Recorded disasters between 2001 and 2010 tripled. There were 10 significant events with far-reaching impacts affecting approximately two million people and causing nearly US$1.21 billion (2010) in damage. Hurricane Ivan in 2004 resulted in over US$351 million in damage, equivalent to eight per cent of GDP. Damage to infrastructure amounted to nearly half of the total costs.

• Natural disasters represent a significant contingent liability for Jamaica comparable to others, like commodity price fluctuations and exchange rate volatility.

• Simulated data from the CCRIF SPC (formerly Caribbean Catastrophe Risk Insurance Facility) shows that as of August 2013, the fiscal cost (for example, explicit public sector liabilities) of natural disasters in Jamaica is estimated at approximately US$120 million for hurricanes (wind), US$62 million for floods, and US$42 million for earthquakes on average per year. The probable maximum loss for a 100-year hurricane (that is, 0.01 per cent likelihood of occurring in any given year) could be 20 per cent of GDP.

• Losses resulting from natural hazards are correlated to the high exposure of the country’s assets. The total exposure value of Jamaica’s infrastructure assets was estimated at approximately US$18 billion in 2014. This accounts for urban construction, rural construction, and national infrastructure.

Missing from the World Bank data is the low local insurance penetration rate and the consensus prediction that climate change is triggering more intense storms and the frequency of such events.

Insurance penetration measures the insurance sector’s development within a country. It is calculated as the ratio of total insurance premiums to GDP. Taiwan’s insurance penetration rate for 2020 and 2021 was 20 per cent. Jamaica’s rate for 2021 was 4.2 per cent. This means that few persons and businesses insure their assets, and insurers will play a small role in funding disaster recovery efforts. There is a big protection gap.

Adrian Ladbury wrote recently that the VKG, the Swiss disaster insurance system – unlike the local disaster insurance system – “is integrated with prevention, response, and mitigation activities at a federal level through an integrated national risk management system developed in the 1990s following a wave of natural disasters. The integration of loss prevention and insurance is much more in Switzerland than in most other protection gap entities worldwide. That approach has allowed the Swiss system to provide very affordable and comprehensive insurance against various disasters, which is economically and socially sustainable.”

Neither our policymakers nor insurers have made the connection that the Swiss have made. For example, the board composition of ODPEM, the Jamaica Fire Brigade, the National Works Agency, the Financial Services Commission and even the National Road Safety Council provide examples of the limited way that we think about public-private partnerships in the context of national disaster risk management.

The thinkers at our tertiary institutions have also failed to make the links.

Meanwhile, I am sure that the JSIF staff supervising DVRP, like some of the senior technocrats in the Office of the Prime Minister and the Planning Institute of Jamaica, see integration possibilities.

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 business@gleanerjm.com