HOW INNOVATIVE FINANCE CAN HELP TO BUILD RESILIENCE TO NATURAL DISASTERS
The Atlantic hurricane season in the Caribbean last year was one of the most active and destructive on record. Within the space of a mere two weeks, two category 5 hurricanes tracked destruction and disaster across the Caribbean.
Dominica suffered the full brunt of the destructive forces of Maria. In her wake she left 30 dead and 34 missing, 90% of housing structures damaged, damage to public infrastructure and the key tourism and agriculture sectors.
The official Post Disaster Needs Assessment quantified loss and damage at USD1.3 billion or 226% of GDP.
Hurricanes are by no means new to the Caribbean however we are witnessing an increase in storm activity. They are more devastating today because they have increased moisture and are intensifying more rapidly. This is attributed to the warming of our seas experienced as a result of climate change.
Adjusting for inflation, the cumulative cost of category 5 hurricanes in the last 18 years of the last century was approximately $100bn in current dollars.
In the first 18 years of this century, the damage has been over $400bn.
Perhaps more important is the scale of damage not captured in dollars and cents.
When 90% of homes are damaged, as in our case.
When all power lines, water lines and phone lines are down.
When there is nowhere to hide, no place to find refuge. It is an open battlefield and rescue, recovery and rebuilding are doubly arduous.
We are truly on the front lines of the war on climate change.
Ladies and Gentlemen, the Caribbean does not contribute in any significant way to global warming. It did not contribute to the stock of greenhouse gases in the atmosphere.
Quite the opposite.
We are part of the earth’s carbon sink. In Dominica, our rain forests alone sequestrate a million tons of carbon per year and our mangroves and sea grasses even more.
We champion eco-tourism and sustainable fisheries. We have some of the oldest national parks and marine conservation areas in the world.
We now have the difficult task of rebuilding and I have committed my Government to building the world’s first climate resilient nation.
Our vision is to create a nation where resilience to climate and disaster risks is incorporated into the very DNA of the country. Where every sector in society, public and private, makes building resilience part of their work plan that incorporates consideration of climate impacts, in their decision making.
We will ensure that our systems of food production, water, shelter, power, communications, transport, schools and clinics are resilient to future hurricanes and our economy is water-proofed.
I think that we can all agree that disaster resilience is woefully underfunded.
“Building back better” which is at the core of climate and disaster resilience, necessarily involves higher costs to meet improved building standards. It requires innovative solutions, technical expertise and most importantly timely access to affordable financing.
The Caribbean is extremely vulnerable to natural disasters. Maria has taught us that building resilience is not an option, it is an imperative. Significant investments must be made in undergrounding of our power and utility line and the relocation of some communities to less vulnerable areas is a must. Strengthening of our building codes has already been undertaken. Sea defences, slope stabilisation, river training and dredging, reconstruction of bridges and roadways must be undertaken as a matter of urgency.
With the help of the United Kingdom and with the input of other partners, we have established a Climate Resilience Execution Agency for Dominica (CREAD). This Agency is designed to boost the capacity of the Government to coordinate and implement major capital projects in a professional and transparent manner.
I am pleased that today you will consider innovative financing to build resilience to natural disasters. In the Caribbean, with support from our partners we established the Caribbean Catastrophe Risk Insurance Facility (CCRIF), which is an insurance pool that provides for a quick pay out upon occurrence of a disaster event, such as those caused by a hurricanes or earthquakes.
Within 14 days of Maria the fund paid $19.3m. This represented less than 2% of Maria’s loss and damage, but it was very useful in funding emergency relief, in particular the supply of food and water.
As a mechanism that allows for quick response this facility should be supported and expanded.
We applaud the efforts of the Centre for Global Disaster Protection to develop a new type of fund that has the pay-out delivery mechanism of traditional insurance, but with alternative and expanded sources of funding.
I recommend that the Centre looks at a feature of some successful insurance markets, where the manner in which premiums are assessed and who pays them, acts as a disincentive to the behaviour that creates the risk in the first place.
Perhaps the premiums for climate damage insurance should be paid by those putting excessive carbon into the atmosphere. This way, emitters not only contribute to the wider costs of their emissions, but they are incentivised to change their behaviour so as to reduce the premiums they pay and thereby reducing the risk to the rest of us.
That would be a way of making the market work to help reduce climate change. In the current system those who carry the costs are not those who reap the benefits. As a result there is an underinvestment in limiting climate change or mitigating its cost.
I call upon the centre to turn ideas like these into practical experiments.
The availability of climate or green bonds to finance low carbon and climate resilient infrastructure, debt for nature swaps and offering lower insurance premiums to policy holders who adopt resilience strategies are also some of the measures that can be considered.
We look forward to the suggestions that will be made today for leveraging the world’s resources to make funding available in a timely manner, for the critical task of building resilience to natural disasters.
Time is not on our side.
The time for action is now!