KINGSTON, Jamaica – A leading insurance executive has issued a stark warning about Jamaica’s vulnerability to catastrophic financial losses from natural disasters, calling for urgent policy reforms to fortify the country’s Special Economic Zones (SEZs). Levar Smith, President and CEO of Marathon Insurance Brokers Limited, revealed that the nation’s substantial insurance protection gap leaves billions in potential disaster losses unsecured.
Speaking at the Special Economic Zone Authority (SEZA) BAC Accelerator Series on Wednesday, Smith presented a detailed analysis of the economic impact of Hurricane Melissa. The catastrophic event caused an estimated US$12.2 billion in damages, representing a staggering 56.7% of Jamaica’s gross domestic product. However, only approximately US$4.16 billion of these losses were covered through a combination of sovereign risk instruments and private insurance arrangements.
The protection coverage breakdown showed sovereign protection totaling US$662 million, incorporating payouts from the Caribbean Catastrophe Risk Insurance Facility (CCRIF), a World Bank parametric catastrophe bond, and contingency funds. Private market insured losses reached approximately US$3.5 billion. Collectively, these covered only about 34% of total losses, creating a massive protection gap of nearly US$8 billion that remained unaddressed.
Smith emphasized that insurance penetration varies dramatically across different sectors. While hotels maintained nearly complete coverage, most Jamaican homeowners had minimal to no insurance protection. Large commercial properties typically carry insurance but often at values below true replacement costs, and small to medium-sized enterprises show insurance uptake rates between just 5-20%. Among homeowners, only about 20% maintain insurance coverage, with most being significantly underinsured.
The insurance expert highlighted that SEZs face particularly complex risk exposures that extend beyond physical damage to include operational disruptions. These specialized zones depend critically on uninterrupted operations, and disruptions to ports, airports, and logistics hubs can trigger immediate income losses alongside broader economic consequences including employment reduction, decreased consumer spending, and tourism industry contraction.
Smith referenced a regional case study where a major Caribbean port sustained hurricane-related losses between US$12-20 million. Successful recovery within 18 months was achieved through comprehensive pre-loss planning that included updated property valuations, adequate business interruption coverage, and structured claims processes supported by international reinsurers.
Proposing concrete solutions, Smith urged policymakers to implement reforms including mandatory minimum insurance standards tied to current property valuations, tax incentives linked to adequate insurance coverage, and creation of a specialized SEZ catastrophe pool to reduce premium expenses. He additionally advocated for expanded parametric insurance adoption, mandatory business continuity planning aligned with insurance programs, and annual professional valuations for high-value properties considering post-hurricane construction cost increases of 35-45%.
Smith concluded that strengthening Jamaica’s insurance framework within SEZs is essential for maintaining investor confidence and safeguarding economic stability, noting that investors prioritize stability alongside tax incentives and that a well-governed insurance system could become one of the country’s most significant competitive advantages.