As natural disasters caused by climate change drive up insurance prices here and abroad, the government is planning a raft of measures to ease the burden in the Virgin Islands, according to Deputy Premier Lorna Smith.
“The rising costs of homeowner insurance policies is a multifaceted challenge influenced by a combination of local and global factors,” Ms. Smith told the House of Assembly on Oct. 31. “It is important to recognise that this issue is not isolated to the British Virgin Islands but is part of a broader global challenge.”
As early as next month, conversations will start about the possibility of lobbying for a regional risk-sharing programme or reinsurance solution, according to Ms. Smith, who is the minister of financial services, labour and trade.
Other measures, she added, are also under consideration: collaborating with the insurance industry to provide more affordable products; strengthening regulatory oversight; launching educational outreach for homeowners; better enforcing building codes; funding resilient infrastructure; and developing long-term strategies for better risk management.
“It is no secret that climate change is driving an uptick in the frequency and intensity of natural disasters, including hurricanes, wildfires and floods,” she said. “These events result in billions of dollars in damages annually, placing significant strain on the insurance sector.”
Recent disasters, she noted, have included hurricanes in the Americas; wildfires in the United States, Australia and Canada; flooding in Pakistan and Afghanistan; and earthquakes in Turkey and Syria.
“Right next door in Acapulco, Mexico, Hurricane Otis recently struck as a Category Five hurricane, causing substantial destruction and loss of life,” Ms. Smith said. “These events have led to annual insurance losses exceeding $100 billion since 2017, putting immense pressure on reinsurers, the same entities that provide coverage to the BVI.”
2017 hurricanes
Also in the VI, she added, the cost of homeowner insurance was driven up by high pay-outs in the wake of hurricanes Irma and Maria as well as inflation and limited reinsurance capacity in the Caribbean.
“I recognise that this is cold comfort, but the USVI next door has to pay at rates still 40 to 50 percent above what is available in BVI, with much of the rest of the region in the same boat as we find ourselves,” she said.
While considering the possibility of a regional risk-sharing programme or reinsurance solution, government may also expand its partnership with the Caribbean Catastrophic Risk Insurance Facility, she added.
Discussions addressing the impact of climate change on the rising costs of residential and commercial property insurance are due to begin next month as well, Ms. Smith told the House of Assembly.