SPEECH DELIVERED BY HONOURABLE MIA MOTTLEY, DEPUTY PRIME MINISTER AND ATTORNEY GENERAL OF BARBADOS

7TH ANNUAL SIR ARCHIBALD NEDD MEMORIAL LECTURE GRENADA TRADE CENTRE JULY 2005

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Thank you very much.

I still am not sure how I should start here tonight, because when I was 5 years old I went to live with my grandmother, who was Grenadian, and for the next two years, she told me about Grand Anse Beach every day. And I am almost embarrassed to admit that this evening is the first time that I saw

Grand Anse Beach; so that if there is a level of emotionalism in me tonight, it is more in memory of her, as she has now passed from this world, and the ability to be able to come to where she came from, and to be able to appreciate some of what she has helped to do to influence me and who I am.

I want to thank the Grenada Bar Association for the pleasure of being able to be here with you tonight. This lecture series is not known only in Grenada but is renowned throughout the Eastern Caribbean, and indeed, the work that your Bar Association has been doing as an agent of change in this country is one that is respected throughout the region.

1 I want to say that for me, law is merely a tool of empowerment; and for us in the Caribbean, I say so because for too long in our history it has also been an instrument of oppression. And to that extent, an activist Bar Association which sees itself not only as the body that represents the interest of people who want to make money by the practice of law, but as an instrument of education and a tool of empowerment is one that warms my heart greatly.

And it is in that context that you perhaps will better understand the paradox of what Ruggles suggested to you this evening, because he did, indeed, ask me first to speak on constitutional law, but I chose instead to speak on insurance. And I've chosen instead to speak on it, not as Attorney General per se, but as a policy maker and as a Caribbean person, because good policy drives good law. And if we understand that, then we better understand the legal framework which is necessary as we seek to meander these very difficult waters that we find ourselves in, largely driven by matters completely out of our control, not just from the Divine Order, but indeed, from the actions of man and the negative consequences of climate change, which we as small-island developing states contribute least to but suffer most from. So that, Ladies and Gentlemen, you will therefore forgive me for this departure from a heavy academic legal speech to one that seeks to be

2 confront what I consider to be the most challenging issues facing the development of Caribbean people in the early twenty-first century.

When I was Minister of Education, I said all along that we were fortunate in

Barbados to be able to be dealing with qualitative issues -- how do you make children, more children benefit from the system, and how do we ensure that each child benefits to the maximum of his or her ability. And I said so proudly every day. But always there was in the back of my mind and there was an acknowledgement when we were within closed doors that within 24 hours we could move from qualitative issues in education to quantitative issues in education, mainly access, because the inherent vulnerability of the small states in which we live caused us to constantly recognize that overnight the monies which we were diverting to being able to improve the quality of education and to benefit larger numbers of people from education could change immediately and we would be forced to deal with the very real issues of access. And this was in the environment. The governments in the region traditionally have not treated to the preservation of public infrastructure in a way that guarantees their replacement; and that becomes the metaphor for what we face across the region in terms of the very tenuous existence that we have, which it would be presumptuous of me to begin to even talk to you about, given your experiences within the last year.

3 But it has hit home since the late 1980s, with the relative period of calm which we had throughout the region -- and I define the region not just as the

Southern and Eastern Caribbean, but moving right up to the panhandle of the

United States of America -- is over; and indeed, there was, like with most things in the Caribbean, an early clarion call which we jumped at and then sat back down. The late 1980s saw a series of hurricanes that in fact led to an early and initial action on the part of Caricom with the Conference in

Bahamas and the establishment of a working group responding to the extraordinarily high rises in re-insurance and consequently, local insurance premium. Working groups were established and we were focused on the effort of trying to see how best we could develop domestic and regional mechanisms that would prepare us. As faith would have it, this was compounded by the experience of Hurricane Andrew in Florida. And in

Florida, they had the extraordinary experience of having a catastrophe so vast that it exceeded any expectation that insurers or policy makers or average citizens had ever contemplated and indeed, it forced them back to the drawing board, and saw, for example, the closure and bankruptcy of over

11 major insurance companies in Florida. Nothing like this was ever contemplated.

4 That led the to the American market responding, and in particular those in the off-shore markets like Bermuda, to the development of new instruments of Security, sought out by the insurance market; sought out by private commercial players, to be able buffer what had transpired, and indeed, the capital markets were seen as the saviour such that they could develop these new instruments with security so as to be able to buffet what was happening in the traditional insurance markets. As a result of that move, the prices which we saw move in the Caribbean in the early 1990s up, leveled off and then came back down, and even though they came back down because the original increases were 200-300 percent of what they were before, even when they came back down, however, they were still higher than the late

1980s' prices that were available.

I start from this perspective because this is not the first time the region is seeking to deal with these problems. And an example of the early 1990s where we had the political will and where we started to put measures in place and where that political will dissipated because of the temporary abatement in price increases in premium is and ought to be an example as to why we need now more than ever to develop the commitment and the collective will to define what is our responsibility as Caribbean people, not

5 just to ourselves, but to those who will come and in whose names we hold these lands in trust.

We have seen, for example, the horror that the last five years has brought to many countries in the region. And one of the difficulties that it has precipitated is that there has been a lack of preparation such that the scale damage which has ensued has not only been far greater than it ought otherwise to have been, but it has also led to increase costs and an inability of insurance companies to be able to plan their business. The business of insurance is as integrally linked in our own domestic efforts for reduction of risk as it is in the issue of the cost of re-insurance and the access to large domestic savings to be able to treat to the preparation and management of risks.

We, therefore, have to view the actions that are necessary to treat to the further development of the insurance industry and to the further development of our own region in a holistic context and not simply through the narrow prisms of either the eyes of commercial insurance, the eyes of the government alone or the eyes of the individual citizens. And, therefore, the single message that I bring tonight is that it is that holistic perspective, driving actions on the part of different players on the market through

6 legislation, through cultural initiatives, through policy and institutional building, through financial mechanisms and ultimately, through diplomatic action that is necessary in order for us to reposition the Caribbean to be able to stave off the negative consequences that are there over the course of the next few years as we seek to stabilize our society.

We have, from the time of man, known that natural disasters are capable of wreaking great havoc to society. Indeed, it is fair to say that natural disasters have been responsible for more loss of life than even man himself; and throughout history the examples are there. But for us, as I said, in small-island developing states, the situation becomes even more acute and we have, therefore, to identify what is that shared perspective that binds us all together; because even if an individual's house or an individual's business is not immediately affected, the extent to which the society and the economy is affected means that there is an indirect consequence to each player in the market. In that context, governments of the region have had to understand the hard way, and working with groups such as CDERA, organizations such as CDERA, the Organization of American States and the World Bank, that we have to be able to change the policy framework within which we plan and develop our economies and our societies. The ability to be able to treat to policy initiatives such as national building codes, proper land use policy,

7 proper town planning regulations, strengthening all of the credential standards, and something that we in the Caribbean seem not to like to do -- enforcement of all of those regulations, that those things become in truth and in fact the first platform for us to be able to reduce the cost of insurance and to be able to make insurance affordable to all of our citizens across this region.

The failure to have the strong building codes has meant that the quality of construction invariably has been varied. One only needs to look at the study which was carried out in St. Martin in terms of the difference between the experience of those who were in the Dutch half of St. Marteen and those who were in the French half of St. Martin. And Mr. Tony Gibbs, a renowned Grenadian and engineer, an expert in this area, would have completed a study which clearly shows that the increased bureaucratic mechanisms within French St. Martin requiring the approval by engineers of the designs and the actual projects in relation construction was the key factor in the larger number of buildings remaining standing in French St. Martin over Dutch St. Marteen.

But when you talk about enforcing national building code legislation, people feel that you are increasing the cost of building; people feel that you're

8 seeking to exclude persons, who otherwise have been involved in the construction sector, from being able to continue to make a living. And these are part of the difficulties that we face in small societies when seeking to bring about change. But what has been the experience in Florida and the

United States of America generally. They have now so developed mechanisms that not only do they have the building codes but insurance companies now assess the risk of communities and roads and houses based on the ability to comply with aspects of the codes that have been set out and based on their ability to assess the quality of the skills of the persons who are in charge of the enforcement of those codes. And there is a direct correlation between the reduction in the cost of premiums, and the performance of those entities; and it is one that stands there for us to be able to use and reflect upon if we are going to begin to look and see how we are going to make the cost of insurance more affordable in the region.

The reality is that insurance companies in the Caribbean have largely been foreign branches of international companies; and to that extent they have seen themselves not wanting to participate in building strong reserve funds to be able to deal with the problems in the Caribbean, but rather, seeking to source the insurance and to be able to transfer the risk because of the high level of commissions that are available to most of the insurance companies.

9 Unfortunately, the experiences which I averted to just now in relation to the late 1980's and early 1990's, has meant that that high level of price volatility in relation to re-insurance will in fact mean that the Caribbean has to turn inward to see how we can develop some greater level of self-reliance and greater level of self-insurance if we are to meet these needs. If we understand that, then we better understand why the policy framework in relation to building codes, town planning and land use policy becomes the first platform upon which the government must satisfied itself that it has discharged its responsibility to be able to create the kind of environment within which indigenous and other insurance companies in the region can begin to develop and begin to respond to the problems which confront us as a society.

Disaster mitigation is the key component in our being able to ensure that we can reduce the losses that will flow thereafter from any disaster. And the role of government, however, is insufficient because if the individual citizen now is not prepared to adhere to the policy and legislative framework that is set up by these regulatory agencies, then equally we are still not going to benefit from the downward adjustment in premium and cost that is necessary in the Caribbean.

10 We have a 'happy go lucky' people in the region, and for the most part the fact that it didn’t happen to us means that it cannot happen to us. And once again, we have with regret and compassion looked on at what happened to you here in Grenada. But in spite of that, there is no sense of urgency, for example, on the part of the Barbadian population to want to treat to mitigation and reduction of risk in the manner, which in my view, is necessary as we are now into another hurricane season. And it is understanding how you can try to trigger effectively a cultural change in persons such that they understand that even though you may not have been an immediate victim in your lifetime, that the scale of the damage requires that your action be immediate and urgent in order to be able to mitigate loss.

One of the difficulties that we have is that in many instances, most people have no serious buffer of capital and therefore are, even where there is an inclination to want to change, there is not the ability to be able to have access to the resources. The urgent role which governments along with financial institutions in the region must continue to play is to be able to provide that buffer of capital and access to capital to be able to make the changes that are necessary that has been dictated and required by the insurance industry more and more, saying that if you have this regulatory framework in place, we are going to assess risk with reference to the

11 regulatory framework; we are going to assess risk with reference to compliance with the building code; with reference to compliance with zoning and planning regulations; and to the extent that you are not complying with them, we are not prepared to give you the reductions in premiums that you could otherwise have. And secondly, we are not prepared to be able to address issues in terms of deductibles in a way that would favour the insured person.

We in the Caribbean have, therefore, to work with the financial companies to see how best we can expand the coverage of insurance through utilization of conditionalities, as happens in the larger mortgage companies. But the vulnerability is not so much with those who could afford to access mortgages, but is in truth and in fact with those low-income communities for whom governments invariably have to be prepared to stand the cost of rebuilding and reconstruction. But what is the reality as well for them?

Many of them are accessing small loans, many of them are going to non- traditional institutions, and we have to find a way, as governments and insurance companies, of having these non-traditional financial institutions -- credit unions, in our case, urban development commissions, rural development commissions, make as a condition for access to funds for home improvement of any sort, the ability to be able to protect themselves,

12 because if not, we are not going to be able to arise out of any major disaster with the assuredness that we have the ability to rebuild in the shortest possible time.

Most governments in the region are facing difficult fiscal situations and they must stand responsibility to the public infrastructure, but they must also stand responsibility to the vulnerable communities, in particular low-income communities where people simply do not have the ability very often to provide for themselves. And when we combine that with the fact that the insurance companies, as I said, have limited reserves and invariably are agencies for foreign entities and are facing difficult circumstances for accessing re-insurance, you have a recipe for disaster because you have an inability to recover in a short as possible time. And this happens at a period in our development when most of our economies are facing restructuring, when most of our economies are being told that we have to develop competitive enterprises to integrate into liberalized environments, be it hemispheric, be it regional, be it global, and at the same time that we are being told to do that, we have limited capacity to be able to respond to events that in recent times have become annual events. Where, therefore, are we going to get that capacity from?

13 The Caribbean Ministers of Finance, with the example of Ivan, have started to look seriously at these issues, and as I said, I referred to the 1993 example because it is our fervent hope and desire that on this occasion we will have the will to complete the task, particularly in relation to the establishment of key mechanisms such as catastrophe reserve funds at a regional level, to make up for the fact that we simply don’t have, either among the governments or indeed among the insurance industry, and the general private sector, the capital base to treat to wide scale catastrophe in the region. One of the things, however, that they recognize goes in our favour is that while the region is vulnerable, no country is usually hit year after year in the same place, and therefore the capacity to spread the risk among countries becomes an option because of the fact that the geographical patterns of the hurricanes and the earthquakes tend to mean that a country is usually spared from the repetitive damage that might otherwise take place. If we accept that, it means, therefore, that the pooling of resources becomes the first and most viable option for us to treat to.

In Guyana last month, the Ministers of Finance in the region met to begin to advance the work coming out of a round table which was held in Barbados in October last year, as an immediate response to your circumstances, those of Tobago, those of Cayman, those of Jamaica, in relation to Hurricane Ivan.

14 And the three major areas that they addressed were the areas of risk prevention and risk mitigation, insurance coverage of private property and insurance coverage of public infrastructure. At that time, they recognized that significant work has been done in the region, as I said, over the course of the last decade, but it has not been brought to fruition. And the average

Caribbean citizen and the average Caribbean company have not yet been able to benefit fully from the work which has been done. We worked with representatives of the World Bank and they then, who have met in St. Lucia earlier this year, to see how best we could complete the feasibility study that is necessary towards the development of this regional Caribbean catastrophe mechanism.

I believe that it is important for me to reflect on some of the key areas that are at issue. In relation to risk prevention and risk mitigation, the areas of lack of preparedness, to which I earlier referred, will be focused in truth and in fact on the meeting. The recognition that in most Caribbean territories there was not and is not a meaningful emergency response plan, there is not meaningful relief and rehabilitation plans, there is not meaningful reconstruction plans, and in very many instances, there are countries that simply do not have effective emergency management legislation that sets up just not the institutional infrastructure to the response; but because of the

15 limited resources base imposes burdens on various Ministries, who know from before an emergency hits whose responsibility it is to do what, what is to happen and what are the kinds of things that need to be put in place should the worst happen. For example, most of us have in our Constitution national emergency legislation; but like with us in Barbados recently when we had the prison disturbances, we didn’t want to declare a national emergency. But there were still things that you needed to be done and to have facilitated in a very tense and difficult environment. And what is clear is the need within the context of emergency management legislation for a lesser response, a lesser capacity than what your full national emergency powers afford, but at the same time, greater flexibility than would otherwise occur in the day to day environment.

What are some of the examples? People coming in to rebuild after a hurricane; invariably, work permit requirements; invariably, other regulatory requirements; invariably, things such as taxation on key essential goods -- generators, tarpaulins, etc., and the entire bureaucracy of government has almost to be put on pause so as to facilitate the earliest and quickest possible response.

16 It is my view that comprehensive emergency management legislation in the region needs to be able to plan and speak to these things on the parallel track of the preparation of these various plans to get us up and running. In addition, we feel that the relief and rehabilitation plan and the reconstruction plan are key, because if persons at the individual level or the corporate level understand and know these roles, then your response is not only a governmental response but a national response because people know what is expected of them ahead of time. We use legislation in the region to ensure certainty and transparency in respect of what people expect in different situations, and there's absolutely no reason why the legislative framework and the development of these plans should not be the key plan upon which our preparation for prevention and risk mitigation proceeds.

Secondly, the issue of hazard mapping and zoning specification; there's no reason why each country in the region should not have clear information as to which areas are likely to flood, which areas are likely to be the subject of major landslide, where are we likely to be able to have to restrict movement because of the inability for people to travel once certain roads become impassible; and if you have that kind of information, no different from those who know what it is to manage a political campaign, that you allow yourself to be able to effectively put measures in place. Now all of these things may

17 sound esoteric, but if you understand how the insurance industry works, all of these things go to the actual reduction of risk such that there is a direct correlation between that and the costs that are charged, ultimately, to the consumer.

I have spoken about the planning and zoning already, but the ability for governments to be able to use legislation once again to provide certainty in relation to tax relief for key aspects of mitigation and prevention is also relevant. In Barbados, we have introduced tax relief measures in legislation for those wishing to retrofit their houses with shutters, wishing to put on the hurricane straps to tie down the roofs, and a number of other things that invariably are designed to encourage the individual house owner to take responsibility for the reduction of risk.

In Florida in the post-Andrew environment, they went even further. There was a deliberate policy decision that the insurance industry could not afford to manage the type and the face the kind of risk that Andrew presented, and that in truth and in fact when they did their work and worked out what was the probable likely loss for a future event, it is in excess of US$100 billion.

And two decisions were taken to be able to shift the risk, some of the risk from the insurance company, from the government to the individual property

18 owners. And they did that by invariably increasing the deductibles such that there were larger sums that you were responsible for paying up front before the insurance would kick in, in terms of what it would pay back to you. And unfortunately, in Florida, they did it in circumstances where it was limited to the particular disaster so that in a season where you had three or four, like last year, householders found themselves being the victims of multiple deductibles in relation to the damage which their homes faced.

Fortunately for us in the Caribbean, the insurance companies, having shifted some of the risk after that late 80's -- early 90's period, and carrying the deductibles up to 2 percent, there has not been a corresponding shift again upwards in relation to deductibles. But I wish I could speak with the confidence that it is unlikely to happen, because the truth is that there simply is not the resource base in the region for us to fight this problem, certainly individually as territories, and possibly even as Caricom countries know.

The second area, as I said, is the question of insurance coverage on private property, for the most part, the more established buildings, the more established properties, tourism-related properties, commercial properties, private residential properties -- in fact, I am sure in the region. Indeed, the figures show that there is a reasonable level of insurance penetration as

19 premiums paid of a percentage of duty paid are really not much left than what it is in the developed world. But we know that the real problem comes among the small and medium-sized sector, as I said, low-income areas, communities that are vulnerable to floods, landslides, etc., and where the quality of housing is not necessarily that which can withstand the scrutiny of a serious national building code. But the reality is that you can't just impose on people overnight these requirements because they don’t have the resource base either, to be able to make the adjustment. And the question is, what are the various things that can be done to begin to move towards a greater level of coverage among private properties in the region.

The role of governments, without doubt, has to be examined. We feel, apart from the tax allowances to which I spoke earlier in relation to retrofitting and strengthening of hurricane straps, that it may well be that Caribbean governments may have to consider tax allowances on the basis of a portion or part of insurance premiums for property, just as some have already spoken and addressed this issue in relation to insurance premium for life insurance, just as we have done to develop and foster growth in the credit union movement.

20 There is a reluctance to move to mandatory insurance as a legislative prescription because it is simply impractical, given the fact that the very reason that these companies have first to meet solvency requirements and manage risks means inevitably that they are unable to take that large pool of low-income housing or vulnerable housing and accept responsibility for it because the risk is simply too high; so that while your objective may be ultimately to be able to move to comprehensive coverage across the private property market, you can't do so in the immediate future without there being a negative impact on the viability and the solvency of the insurance companies in the region. And you don’t want that to happen, because if they are not capable of being insolvent, then they can't play the role that they must play in relation to the rest of the economy; so that the balance in relation to how we encourage and at what rate we encourage persons has to be one that is measured, and we believe rather than a legislative prescription requiring mandatory insurance, that the ability to use tax incentives and to use the financial companies, traditional and non-traditional, to encourage and require home owners to be able to move in this direction will allow for that measured pace to that area.

The very obvious thing is the question of enhancing the capacity of insurance sector. Most countries, within the last decade, responded

21 favourably to that working group that Caricom had earlier established in

1993 by doing one thing -- by ensuring that they passed appropriate legislation governing credential and regulatory standards in the insurance sector. What was the appropriate levels of capital; what was the adequacy; what are the appropriate mechanisms for ensuring prompt notification and supply of information; the capacity of the regulatory authorities in their dedicated offices, supervisors of insurance or otherwise, to be able to monitor and see how these insurance companies have fared.

Part of the difficulty, however, though, was that when you were trying to persuade them to be able to move more of the risk and to keep more of the risk on shore in the Caribbean to save foreign exchange, to be able to buffet against the price volatility to which I referred earlier, that there was a very genuine concern, and is a genuine concern, that the levels of profit and the capacity to build up significant reserves on the part of these insurance companies is simply not there. In Trinidad, they perhaps have the company with the largest reserve fund at the highest level of US$17 million. Now, that is a drop in the bucket in comparison to the kind of losses that these countries can face in the event of the worst happening.

22 In addition to that, there are other countries, like us in Barbados, where we tried to implement a catastrophe reserve fund in 1998. Initially, it has been a voluntary mechanism, and we provided a framework where insurance companies were allowed to deduct 20 percent of net premium income from property income annually, up to 100 percent equity, and this was for exquisite tax purposes. And this was to be set aside for catastrophe reserves and to assist in allowing the companies to become stronger and to save the foreign exchange, as I said. In 2003 we increased this deduction up to 25 percent. Several companies have been using it, but the growth of it has not been set as we would have thought, and to that extent we are now moving from allowing it to be voluntary to making it mandatory, that insurance companies set aside this percentage of their premium income, up to 25 percent of the premium income, in order to help allow for these things to work.

But what is the real answer? We are not going to have significant growth in reserves when you have large numbers of small companies trying to manage risks in markets that are already small, and to a certain extent, if there is to be one area in which there ought to be greater consolidation of ownership in

Caricom, it is in the insurance sector because of the need for the economies of scale, in order for them to remain viable. In Barbados we have seen Life

23 of Barbados, Barbados Fire and General and Barbados Mutual, all come under the wings of SAGICOR. The government has not resisted it, and in fact assisted it, largely because we understand that it is only with two or three large insurance companies in the region operating that we are going to be able to meet the needs of both the regional development in terms of providing the kind of cover for the region, while at the same time ensuring that they have the capacity to survive whatever may come or whatever they may face in terms of the worst types of catastrophe.

We therefore feel that while we speak specifically of pooling of risks, that separate and distinct from that, there is in fact the need for some level of consolidation and expansion of companies in order to be able to meet these needs. We feel that once we look at the private property market and the reduction of risks, as I said, the one major issue that stands out is the public infrastructure -- the roads, the schools, the police stations, the hospitals -- all of the things that have taken decades for us to build up with scarce resources, very often borrowed resources, but which, as I said, overnight can be gone. And the region is not in the happy position where there is an abundance of fiscal resources at this stage, and therefore, it is unlikely to be able to rely on any one single mechanism in order for us to be able to treat to the public infrastructure; because apart from the public infrastructure, the

24 same governments have to be able to treat to the citizens who can least treat to themselves.

There are those who suggest that the putting aside of funds on an annual basis, in terms of budget, is the way to go. But there is an opportunity cost to mind. And in countries such as ours where difficult choices have to be made on the basis of limited resources, particularly in terms of being able to bring areas of the economy along, to bring people along who would not otherwise be able to help themselves through education, through subsidized transportation, through subsidized access to health care, it is a very difficult decision for you to be able to take that and rely on budget retention as your primary and only source for preparation in relation to being able to withstand damage to your public infrastructure or to be able to treat to your responsibilities of those citizens who cannot help themselves.

In addition to that, there are others who suggest that governments should set up national captive insurance companies, and just as many of us have international financial services sectors that facilitate captive insurance companies for large multinationals, that we should find a way of being able to set up captive insurance companies to be able to offset some of these.

25 There are those who suggest that there should be frameworks put in place with entities such as the World Bank and the Caribbean Development Bank for contingency lines of credit, such that they help us to be able to pay the premiums in some of these captive insurance companies, and that we will also be able to make the adjustment more regularly than if we had to rely on the fiscal resources domestically allowed.

But all of these systems perhaps have merit, but it is my contention that each one perhaps has to be relied upon because we're not in a position to put aside what we would like to be put aside every year to be able to prepare for it.

We are not in a position to adequately provide fully for national captive insurance companies. And at the end of the day, the thing that is required most of us is to be able to do so on a shared basis. Why should Grenada have to treat to its own responsibilities at home? Why should Barbados have to treat to its own responsibilities for its public infrastructure? And what the Ministers of Finance in the region are seeking to do with the World

Bank is to be able to find a mechanism, a regional mechanism, that will allow them to be able to pool the resources and to be able to ensure that the more governments that participate, the lower the actual risks and the lower the insurance premiums will be. We’ve talked about it, the time has now come for us to put it in place, and there is in truth and in fact clear benefits to

26 be gained from it. Our position, however, as a government in Barbados, is that it should not, however, be limited to Caricom countries alone. The reality is that hurricanes know no political boundaries, they really don’t, and that they come across a geographical path; and whether this is an independent country, whether this is a colony of the United Kingdom, whether this is a colony of France, or whether this is the great Unites States of America, as they feel they are, it hits; whether it is Mexico, whether it is

Louisiana in Texas, whether it is Belize. And the most logical approach must be for all of the countries in the Caribbean, and all of the countries of the Gulf of Mexico, to sit down at the highest levels of government and to put in place a framework that allows us to adequately pool our risks.

I referred to Florida a great deal. But the truth is that Florida has the advantage on us, if only because even where it could not meet the consequences, and a catastrophe such as Andrew, and the four that they had last year, it has the Federal Government of the United States of America still to rely on. We don’t have any such federal structure to rely on. We have, therefore, to use our collective resources and to treat with one another to be able to create that mass, because as I said, you do not get a situation where a hurricane hits the same country every year or an earthquake occurs in the same place every year. And it is the significant pooling of that risk on that

27 wider regional level, stretching from Florida, Louisiana and Texas in the north, across to Mexico and Central American countries and coming as far down as the Southern Caribbean, where most of us are, more admittedly, affected.

And it is our view that the kind of relationship that we must have with one another in the region must be based on what are the common threats that we face in seeking to maintain a successful neighbourhood. In 1986, Errol

Barrow, in addressing the Miami Conference, reminded us that self-reliance, in the situation of the Caribbean, must necessarily mean 'collective' self- reliance. In other words, no single country in the Caribbean has the capacity ever really to feel that it can do it on its own, and that were it not for the fact of water, the truth is that the synergies between our various countries, societies and economies would predispose us to a form of collectiveness.

And if we were therefore to ignore the water and even if not reach the ultimate goal of political unity, work in concert on those key initiatives that can fundamentally affect our well being, then we would be able to find the solutions that will at least mitigate the level of loss that we face in our individual countries.

28 In this instance, as I said, we have been working as Caricom, but it is our fervent view that it is now time to broaden this to the countries of the

Caribbean Basin of which the United States of America is in truth and in fact one; and that when they talk to us about a third-quarter initiative, there is a greater common threat to natural disasters than there is a greater common threat to terrorism for us in this region. It is in that context that we need also to examine the other areas of diplomatic initiatives that will be key to our being able to meet the very significant challenges that face us.

Earlier this year in Japan, we attended a conference at Kobe, which was designed to be able to address natural disaster and the consequences flowing therefrom. I believe that your Prime Minister was present and would have represented, along with other Caribbean persons, the very difficult and dire situation in which we find ourselves. The most amazing thing about that conference was the failure of the international community to respond by putting a serious financing mechanism in place to treat to disasters experienced by small states, and large states for that matter. And the bald truth is that if we are waiting for the international community to come and rescue us, they will not, because that is not on their priority of interest. If we want technical assistance, fine; if we want to be able to discuss who and how we should be able to move towards ensuring that the greater and wider

29 global community signs on to the domestic protocol and takes domestic action to be able to reduce the level of greenhouse gases and hence the negative consequences to climate change which can adversely affect small island states such as ours, almost fine. But you're not going to get the level of response out of any sense of commitment to help countries through forms of official aid and particularly, aid prior to the actual emergency or disaster.

Post disaster, you may get some token of reconstruction aid, but that is invariably insufficient to be able to significantly reconstruct the economies.

And for us, the importance is being able to find a mechanism through insurance and through government that allows us to, in the shortest possible time, restore economic activity and to reconstruct the loss that has taken place. And that is why more and more we are beginning to understand that that ability to look inward, and when I say inward I mean the Caribbean

Basin, is key to our positioning ourselves to meet any disasters that come.

There are other issues at the international level that we must continue to focus, and at the regional level, our attention. And some of them are more mundane, but nevertheless, they still require the conclusion of treaties and invariably domestic legislation to buttress. When a disaster occurs, one of the key problems that an insurance company has after a disaster is that during the period of the event, and immediately after the event, significant

30 looting takes place. And significant looting takes place largely because of the absence of a large law enforcement presence, which during the event is understandable, but after the event is really because of lack of resources.

When that looting takes place, there are insurance companies will tell you that they are unable to accept your claim because the proximate loss cause was not in fact the hurricane, but the looting. And most people who have honestly and faithfully paid their premiums are then left with an empty bucket and nowhere to turn. But the insurance companies have acted perfectly and completely within their legal rights. We have to find different ways of being able to treat to this problem. And one of the ways, in my view, is to be able to ensure that apart from the emergency management legislation which I spoke of earlier, which sets out clear responsibilities on persons during and immediately after hurricanes or other natural disasters, is the recognition that no country in the region -- not Trinidad, not Jamaica, not

Guyana -- has the domestic resources in terms of law enforcement capacity that are necessary to man a country in the event of the worst type of catastrophe that they could face. It is for that reason that we have also just urgently concluded a draft which will go back to the Legal Affairs

Committee in the region, and ultimately the Heads of Government, for signature before, we hope, the end of this summer, where there will be a

31 legal mechanism, a memorandum of understanding between the Regional

Security System and the non-RSS countries of Caricom, such that there can be a call and a request put out to other countries in the region to be able to supply law enforcement and military personnel to be able to be on the ground within 24 hours so as to help with the recovery and stabilization efforts that our countries faces after the worst type of disaster.

These are the practical realities of our existence in the region, and it makes no sense trying to set up fancy bureaucracies or establish large budgets.

What is simply needed is a treaty mechanism that allows for flexibility and that once settled at the regional level, that we then incorporate into our domestic legislation the provisions of the treaty and provide the powers of the equivalent law enforcement personnel to those who have come in to assist. The consequences of failing to do it, as I said, will be and could be the extent to which insurance companies may avoid their liability because of an inability to contain law and order and by extension, an ability to contain looting.

In addition, we recognize that there are other micro-issues that have also to be faced within the legislative framework in the Caribbean if we are to ensure that consumers are not disadvantaged in relation to their relationships

32 with insurance companies. Most of us have passed, as I said, insurance legislation. But that insurance legislation invariably in the region, is dedicated to credential standards, capital adequacy, etc. It is not focusing on the imbalance in the power relationship between the insurance company and the individual consumer. And at the same time, while we must do nothing to threaten the viability and the solvency of these insurance companies, because we need them in order to survive in order to cover the risk, we must not so allow them to put on the … such that the individual citizen is unfair as a result of that imbalance in the relationship.

Most developed countries have passed insurance contract legislation that governs specifically that consumer relationship and that contractual relationship between the insurance company and insurer, and matters, for example, such as non-disclosure, whether non-disclosure should be able to constitute a voiding of a contract; in other words, them saying that they will accept no liability retrospectively, even if that non-disclosure was non- fraudulent, and non-material. Most developed countries have passed legislation now which has said simply that we can accept, but the insurance company can void a contract having issue if it has fraudulent representation, or if there was non-disclosure of a material fact and that it is equally fraudulent. But where, for example, a person simply failed to say something

33 which, in any event, may not have been asked of them in the completion of the forms which they were asked to full out, that that in and of itself should not void the contract and that there are other legal remedies in dealing with damages that may be and should be available to the insured rather than voiding at the issue. Australia, New Zealand, the United Kingdom, all have addressed these issues within only, I must tell you, in most instances the last decade; New Zealand's case, only 2004, so that it is not something that has been around for a long time per se in terms of redressing the traditional perspective of law which gives the insurance companies virtually a much stronger position in relation to the consumer.

What is the problem for us is that invariably, those of us who have general consumer protection legislation rely on the general consumer protection legislation, but in many instances, that carries the balance now too much in favour of the consumer and therefore threatens the balance with the insurance company and places undue burden on the insurance company in a way that may cause them to have their own viability compromise. And it is our view, that rather than having generic consumer legislation treat to some of these smaller micro issues that the need now for us to have legislation that is treating to insurance contracts as per se, and understanding the dynamics

34 of what individual persons face as they seek to settle claims with insurance companies.

So that these, Ladies and Gentlemen, are some of the very bald, and what I call 'unsexy areas' of what we face in the region. We can choose to hope that aid will come from outside, but the evidence is already there, that that has declined every decade for the last three decades. We can choose to hope that we can recover on our own as individual territories, but the clear evidence is also there that neither at the level of domestic national savings, or even the broader Caricom level in terms of our capital markets, do we have the adequacy, the capital adequacy, the level of savings to be able to allow and assure us of our ability to rise above the challenges and the need for capital that may arise in the worst catastrophe. We can choose to say that, as Bajans do, that God is Bajan, that God is a Caribbean person and therefore it won’t happen often, and pray; but the bald reality is that we live in a world where there is now significant evidence of climate change, where there is significant evidence of us suffering by reason of coastal erosion, by reason of rise of sea level, and by reason of increased hurricane activity as a result of these changes. It is unlikely to change in the short term.

35 And the time has come upon us for us to begin to invest in mechanisms, through real law, through financial modalities, through individual cultural change, through diplomatic initiatives, through institutional change, through integrating preparation for disaster management in our national development strategies so as to ensure that we mitigate loss of life, loss of property and loss of opportunity, because perhaps one of the most insidious consequences of our inability to treat to this problem is the delay to our development projection which, in any event, is compromised by greater challenges across the world in terms of trade liberalization, macro-trafficking, terrorism, and other issues that confront us daily.

And we have to recognize, as I said, that these things know no political boundaries. And if ever there was a platform for us to develop a shared perspective within the Caribbean Basin, within Caricom, within countries, it is on this issue of preparation for disaster reduction. We have to recognize that the capacity for financing disaster can't be assumed by government alone, even though government may refinance as a last resort because of its responsibility to the public infrastructure and for the vulnerable citizens among its population, but that it is through the creation of innovative financial mechanism, the pooling of insurance risk and the further development of the insurance industry at the macro level, that we can begin

36 to meet some of these challenges, and as we develop this at the macro level, that we should not so allow there to be any unfair advantage placed upon the individual citizen by reason of the imbalance of power between large insurance companies and small citizens, who invariably have limited options in relation to negotiations; and that when all of this is done, that at the same time, we have to recognize that other key elements, such as the maintenance of strong law and order can equally underpin our capacity to be able to meet these challenges. And whether it is at ports of entry or whether it is protecting people from looting, these are key components in being able to assure people that we have done all that is possible to reduce risk and by extension in so reducing risk cause you to reduce the cost and hence the affordability of that protection to each and every one of our citizens.

There is one area that we are woefully behind in, and it may well be the key area in which we would want to engage the international community on from the point of view of technical co-operation, and that is the development of early warning systems. And those of us in the Southern Caribbean in particular, suffer worse than the rest of the Caribbean and Florida, and that is simply because the rest of the Caribbean and Florida benefit from the technological capacity of the United States of America and the extent to which they put out their hurricane hunters and they use all of their scientific

37 and technological equipment. But the reality is for us, because of where we are positioned, it doesn’t come to us when we need it, and invariably, it results in the absence of accuracy on the part of our meteorological departments in terms of tracking where a hurricane is coming. And that is why in Barbados every year, people will tell you that, "You put us on hurricane warning", or "You put us on hurricane watch and the hurricane didn’t come"; because of the fact that when the planes go out, invariably the systems are already on Barbados, Tobago and Grenada. And those three countries, perhaps more than any other three, suffer because of their location because by the time it is going up the island chain, the resources have been deployed and the capacity for greater accuracy and plotting the movement of the systems is available and hence better preparation on the part of those other islands. Now, we will not necessarily be able to afford to develop that capacity on our own, but it is something which has to be put on the table in order for us to be able to ensure that we can better prepare and that we can, in better preparing, also put another variable in the mix to be able to reduce the cost of insurance in the Caribbean and to make sure that we can better meet the needs.

I believe that we have the capacity to meet these challenges, but I also believe that we cannot meet them alone, and that as much as we have to

38 speak about self-insurance, we have first to accept self-reliance; and self- reliance, as I said, in the words of Errol Barrow, means not individual self- reliance in the Caribbean, but collective self-reliance. And as we develop that collective self-reliance that we accept that we need a platform, yes, with the developed world, but one that allows them to treat to us through appropriate multilateral frameworks where necessary, and in circumstances that respects that collective identity of us as a region such that we can get the best benefits out of it and prepare for our citizens and ourselves in a way that is sustainable. We simply have no choice but to respond in this way. For all of the investments that we make in education and health care and the development of our economy, will mean nothing within less than 24 hours if we are not prepared to take the urgent action to mitigate against this vulnerability that is as much ours, as Grand Anse Beach is yours, as

Bridgetown is ours.

That is the reality of our existence; and the sooner we plan our laws and our policies, and indeed, our actions as individuals to revolve around those realities, the better we will be to preserve that which we have enjoyed for those who have to come.

I thank you.

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