Commenting on the hurricane relief bond announced by the prime minister recently, CFO of Fidelity Bank (Bahamas) Limited Gowan Bowe said the government should look into a different kind of hurricane relief instrument going forward. He put forward the idea of a catastrophe insurance captive, which he said would allow the government to self-insure itself against catastrophes.
Speaking with Guardian Business Bowe said, "We live on the hurricane belt so in reality we have to be creative and start planning for these hits. They were few and far between for many years, but now they are actually coming fast and furious."
Days after the passing of Hurricane Matthew, Prime Minister Perry Christie announced that his administration intends to establish a special hurricane fund by way of a hurricane recovery and reconstruction bond.
Bowe said, "If we are going to go out and raise a bond, that is fine. But, let's be innovative and look at how we establish very quickly a captive insurance entity that will force the government to pay insurance premiums into this captive. That would create a national stream that will show how you can pay the bond back without going into the normal government caucus."
He explained how the process behind the insurance captive would work.
"By effectively paying premiums into a captive -- the same way you buy insurance policies for your car or house -- the government would start paying premiums into a captive on an annual basis. They would then determine the level of risk appetite.
"Say, I want to insure $500 million of government assets and I have $10 million in premiums that I have to pay every year. Do I want to hope that I build up $500 million over 50 years or do I go to the reinsurance market and say well how much would it cost me to buy coverage?" Bowe asked.
He added that in order for the idea to work, it would require the support and assistance of the local insurance companies, which won't make a profit out of it but would be able to contribute to the national well-being.
The next step would be enshrining it in legislation so that the government cannot back out, says Bowe.
Xian Smith, Guardian Business Reporter
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