Following the devastation of Hurricane Dorian last year and now the COVID-19 pandemic, The Central Bank of The Bahamas (CBOB) yesterday noted that it and the Bahamian financial system need to consider how to better “storm-proof” themselves.
The government has revealed it lost $900 million in revenue due to Category 5 Hurricane Dorian, which decimated parts of Grand Bahama and Abaco last September; and the economic crisis associated with the COVID-19 pandemic.
The Central Bank stated that global warming trends are likely to lead to further financial instability through the increased risk of a catastrophic hurricane striking New Providence.
While the Central Bank noted in its summary of lessons learned regarding financial stability outcomes arising from Hurricane Dorian – which included some lessons from the COVID-19 outbreak – that there currently exists reasonably good insurance arrangements that are well-integrated with banking exposures, there are ways to improve those linkages.
“We must encourage Bahamian households and businesses to better protect themselves from catastrophic financial impacts. These protective measures must include purchasing comprehensive insurance coverage, building up savings and ensuring that buildings meet relevant codes,” the bank stated.
“The Bahamas needs to consider how collective action schemes, for example national catastrophe insurance and reinsurance programs, might improve our national financial resilience.”
Deputy Prime Minister Peter Turnquest has estimated that as many as 80 percent of Bahamian property owners impacted by Hurricane Dorian are either uninsured or underinsured.
Insurers have estimated that they would pay out $2 billion in claims from Dorian alone.
Another area of exposure brought on by Dorian and COVID-19 is the need to create universally available mobile phone payments in Bahamian dollars, the Bank states.
It noted that the national adoption of the Central Bank digital currency, the Sand Dollar, should help to address this concern.