The Prime Minister of Barbados, Mia Amor Mottley, gave an alarming warning of what may become a catastrophic insurance crisis within the next decade affecting Caribbean economies.
At the Inter-American Development Bank’s (IDB) Sustainable Week conference at the Wyndham Grand Barbados Sam Lords Castle hotel, Mottley offered a candid analysis of the global financial architecture, and how inadequately it serves climate-vulnerable developing countries.
A Growing Problem of Unavailability As a large part of her talk addressed the growing unavailability of commercially accessible insurance due to the increasing risks caused by systemic climate events, Mottley cautioned of a collision approaching in five to ten years which would limit local businesses, especially tourism related ones, from obtaining commercial loans based upon insurance obligations.
“If insurance costs are too expensive or if there is no longer available insurance… we’ll have problems since those hotels dependent on access to that financing won’t be able to continue to compete,” Mottley said.
In order to counteract this problem, Mottley urged a fundamental restructuring of the economy in all island regions to pool together their respective risks for a larger marketplace size. This way instead of being limited as brokers of global reinsurers, regional insurers can become active participants in regional insurable markets.
Overcoming Red Tape and Disconnection Between Leaders and Decision-Makers At a table with IDB Invest President James Scriven, Mottley sharply criticized the red tape obstacles that hinder the necessary financing.
She pointed out a “disconnection of mentality” between those political leaders offering rhetoric support and those multilateral development banks whose decision-making bodies still follow outdated rules.
“I don’t have time to deal with the mentality disconnect between capitals and the board,” Mottley stated, noting that vulnerable nations “do not have the amount of time that most people believe that we have” to get through slow moving regulatory process when experiencing a “bloody crisis moment.”
The discussion made reference to the significant influence that the Bridgetown Initiative has had on transforming the global financial system.
Scriven noted that many changes currently taking place in the world of finance and development are initiated from Bridgetown.
Mottley indicated that the Bridgetown Initiative has been instrumental in the creation of the International Monetary Fund’s Resilience and Sustainability Fund; and has pioneered both debt-for-nature and debt-for-climate swaps. In addition she announced that Barbados is working with the World Bank, the Caribbean Development Bank and the Latin American Development Bank on an expanded version of “a debt-for-social swap.”
After considerable pushback from some initial skeptics in Wall Street, Mottley proudly shared with attendees that she had achieved great successes in issuing sovereign bonds that include provisions for natural disasters and pandemics.
Specifically, these clauses allow for temporary suspension of debt repayment obligation in cases where a catastrophe occurs. This enables countries like Barbados to secure critical fiscal predictability while allowing for approximately $250 million-$300 million (the equivalent of 17-18% of Barbados’ GDP) per year in savings over two years.
On the environmental side, Mottley made a strong case for quick and decisive action against methane emissions, stating that “methane is 80 times more damaging than carbon in the short term.”
Mottley suggested that reducing methane emissions could provide much needed relief for the earth until long-term decarbonizing technologies develop. Finally, Mottley brought attention to a major breakthrough by a Barbadian scientist named Dr. Bidyut Mohapatra who found three new bacteria species inside Sargassum seaweed which creates opportunities for applications such as plastics degradation, oil spills clean up and antibiotic production.