- November 4, 2019
Hurricane Dorian is arguably still a popular international topic. This is evident in the number of persons that continue to travel to The Bahamas to come to the aide of the affected islands.
The aftermath of the strongest storm to ever hit the Bahama islands continues to place pressure on the government, and stretch the resolve of humanitarian aid workers who have already spent hundreds of hours on Grand Bahama and Abaco assisting with the clean-up and rebuilding process.
Amidst this, there are those global bodies that are looking at the economic pivot-point destructive hurricanes like Dorian can have on Small Island Developing States like The Bahamas.
In one of its Credit Outlooks for October, global rating agency Moody’s examined insurance coverage and a country’s ability to support its citizens during hurricane recovery in The Caribbean and Mexico.
“Within the Caribbean and Mexico, each year hurricanes loom as a challenge to credit quality across sectors,” the Moody's report said. “In addition to the tragic loss of life and catastrophic damage, the cost of emergency management and subsequent recovery can be significant. Most recently, in early September, Category five Hurricane Dorian struck the Bahamas (Baa3 stable rating) killing more than 50 people and causing more than $7 billion in damage“
Moody also reported that property insurance penetrations in The Caribbean pale in comparison to the United States “and sovereign support varies depending on the economic health of the country before the storm”.
Moody’s said both of those vital economic, post-disaster funding options affect the ability of a country to recover. Moody’s added that Caribbean countries’ dependence on tourism can greatly affect “credit quality during and after recovery”, as they depend heavily on tourism for the health of foreign currency reserves.
Moody’s, which determines the credit quality of sovereign countries, explained that a country’s credit health after a storm will speak to that country’s fiscal health before a storm.
“The credit effects on regional and local governments largely depend on their financial stability and strength, as well as the level of support from the sovereign,” Moody’s said.
The Bahamas is estimated to have received more than $142 million in hurricane relief funds for Grand Bahama and Abaco from the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC), the Inter-American Development Bank’s (IDB) contingent line of credit and the government’s own contingency funding.
And the IDB recently revealed that The Bahamas sustained $3.4 billion in damage and losses.
The insurance industry has suggested that payouts from reinsurers could top $500 million, though statistics have shown that many of the homes and properties affected by Dorian were either uninsured or underinsured. Rebuilding could, therefore, be a much more protracted process.
SIDS across the world will likely look to The Bahamas in the wake of Hurricane Dorian for lessons in disaster risk insurance, property insurance, and a government’s need to build a storehouse of savings that it will lean on to get citizens and the private sector back to normal after a devastating natural disaster.
Some contend that had Hurricane Dorian affected the Eastern seaboard of the United States, the aid to The Bahamas would have been much slower and greatly muted, thus bolstering the need for countries to ensure, through fiscal prudence, their own continuity in the aftermath of a disaster.