Hurricane hustle

One such example was the response by the authorities to the residents in New Orleans in the case of Hurricane Katrina last year.

It could be argued that if the most powerful nation on earth could not deal with the scale of that disaster then we in the developing world could well be excused since we have neither the physical resources nor the financial capacity to bring quick and timely relief, if faced with such a disaster. However, that thought should not be comforting and inspite of our limited resources, we must plan for such a possibility in view of our geographical location in respect of hurricanes and earthquakes.

In times past it was argued that we were located too far south but with changing weather patterns the risk of a hurricane affecting us is rising and with near misses we could no longer ignore the signs that we have a higher exposure than previously thought. Of even greater concern is our exposure to earthquakes as we live in an active seismic area but largely choose to dismiss that fact until we experience a strong tremor as a reminder that this real risk must be respected.

Only recently the mayor of New Orleans was stating his plans for a repeat of last year’s disaster, if even the strategy is one of quick evacuation rather than the traditional approach to mitigation on account of the unique set of circumstances.

At a recent conference here in Trinidad and Tobago it was reported that we had nothing to fear from a tsunami since the likely source of such an event could be triggered by the eruption of the underwater volcano off Grenada. The reasoning was that the volcano was not growing and therefore an eruption was not imminent and it was under constant observation.

It followed therefore that there would be an element of risk if there was an eruption of the volcano. I, like most persons, was not aware of the existence of the volcano until about some ten years ago when I visited London. There, I was advised of a study carried out by the University of Lancaster on the risk to the region in the event that “Kick Em Jenny” were to erupt. In particular, Trinidad and Tobago would be in the line of a tsunami which could reach our shores within one hour with consequences to life and property to our developed coastal areas.

Reports appearing in our local newspapers suggest that the impending hurricane season is likely to be less active, when compared with last year’s and may provide a false sense of comfort to the general population. Last year’s activity is unlikely to be repeated as the number of named storm exceeded the forecast and statistically it is seen as an aberration but that does not negate the fact that we can experience another bad hurricane season.

Moreover, there is little visible evidence that preventative maintenance work has been carried out on our main water courses, while the changes taking place all over the country resulting form the building boom must have an impact in terms of water run off and the increase likelihood of flooding.

While disaster planning is not a strongpoint of our people consider the situation in Florida where a tax-free sale on equipment — generators, shutters, flashlights — is heavily advertised in the run up to the start of the hurricane season in respect of items. It could be argued that it has become necessary for residents to stock up on these emergency items since they have been affected more than most in recent years but they have had to live under these adverse conditions and therefore they have to take precautionary action.

Inspite of these risk- mitigation factors, residents have seen an escalation in the price of their insurance coverage and in some cases approaching what is paid by policyholders in places like Cayman and Bahamas. On average the insurance buyer in Trinidad and Tobago is paying only a fraction since we have so far dodged the bullet and still recognised by the international insurance market as the least vulnerable in the Caribbean region.

All of this could change if we suffer any catastrophic loss as the opportunity will be taken to adjust prices upward in this global trading environment so it behoves us to take steps to mitigate losses.

In the early 1990’s the international insurance market instituted minimum loss participation by insurance buyers and this has remained in place up to the present time. Most policyholders may not be even aware of their stake in any claim involving natural perils like hurricane and earthquake. With the continuing rise in insured values it means that they are their own insurer for any increasing amount. Most policyholders have a policy deductible of two percent of the sum insured before a claim is triggered. For example, in a property insured for $1.0 million, the owner is responsible for the first $20,000 in the event of any claim resulting from an earthquake. In the case of a hurricane, most policies carry the same level of deductible but in no case less than $10,000. In many instances, unless there is significant damage, the loss could fall below the policy deductible.

What this means is that policyholders have a big stake in their insurance coverage and for this reason they must have an interest in ensuring that their properties do not suffer a loss. This principle should guide all our actions in taking preventative measures in disaster planning and reducing losses, especially by our decision-makers and planners since loss prevention is everybody’s business.

The international lending agencies are now promoting pre-disaster planning rather that post-loss financing and therefore we who live in an area which is susceptible to disasters must take action upfront in the planning process.