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Moody’s RMS releases new report on “The Future of Caribbean Insurability"

The Caribbean islands face a significant and growing threat from the impacts of climate change. These are some of the locations with the highest level of catastrophic hazards worldwide...

As global temperatures increase, sea levels rise, and weather events become more severe, the Caribbean’s risk from climate and weather events will intensify. Only through taking action to raise resilience and lower risk can island communities and governments ensure economic growth in the face of climate change. Mapping a path of action requires integrating climate, hazard exposure, and vulnerability data into advanced catastrophe modeling techniques to assess and prioritize risk reduction investments.

The report explores the following:

  • Insurance helps manage climate risk impacts

In the complex landscape of climate change adaptation, sustaining affordable insurance will be a critical component of Caribbean nations’ efforts to manage the impact of climate risks. The region’s vulnerability to hurricanes, floods, and sea-level rise underscores the importance of investments to safeguard households, businesses, and infrastructure.

  • Looking to 2050: Intensifying hazards

Climate models predict that by 2050 the Caribbean will likely experience more frequent and severe weather events. For the most at-risk Caribbean nations with no investment in building upgrades or other adaption measures (solid red bars), the predicted increase in loss cost is uniformly above 10 percent – up to as much as 17 percent in the case of the U.S. Virgin Islands.

  • Reaching 2100: Coping with evolving climate change impacts

Looking out to the end of the century, protective measures that mitigate risk in the built environment have the potential to curb the worst increases in lost costs, with only marginal increases from present-day values. However, taking no action could result in dramatic increases in potential loss costs – by as much as 27 percent in some cases and as shown below 19 percent for the British Virgin Islands.

  • Dynamics of insurability

As the Caribbean grapples with the evolving impacts of climate change, the threat of an insurability threshold becomes increasingly pertinent. In the context of the Caribbean’s climate change trajectory, even toward 2050, the question of insurability takes on greater significance as the region contends with loss cost increases upward of 10–17 percent.

 

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