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Montserrat’s Contingency Fund Removed: A Recipe for Disaster?
A recent decision by the Progressive Democratic Movement (PDM) administration to remove Montserrat’s Contingency Fund from the budgetary chart of accounts has raised concerns among economic experts. The fund, established in 2013/2014 with a ring-fenced budget of EC$2.5 million, was designed to cover unforeseeable and unavoidable expenses, including those related to disasters.
Critical Timing
The removal of the Contingency Fund comes at a critical time for Montserrat, an island nation prone to natural disasters such as hurricanes. In September 2017 alone, the Caribbean region experienced devastating storms, highlighting the importance of disaster risk management.
Expert’s Warning
According to Economic and Financial Analyst Peter D.A. Queeley, the decision to remove the Contingency Fund is “reprehensible” given Montserrat’s exposed location in the Leeward Islands. “The Government of Montserrat is now exposed, with no monies set aside to cover preparation for or after effects of disasters,” he warned.
Uninsured Assets and Increased Taxes
Queeley also criticized the government’s practice of not insuring its assets, including buildings and vehicles. This lack of insurance coverage can lead to a charge on the public through increased taxes or dependency on aid agencies such as DFID to provide funding for repairs or replacements in the event of a disaster.
Importance of General Insurance Coverage
In addition, Queeley emphasized the importance of promoting general insurance coverage to all households in Montserrat. While financial institutions require members to hold insurance coverage for assets financed via debt and mortgaged, there are still many individuals who own uninsured assets.
Effective Regulation and Supervision
Effective regulation and supervision of the insurance sector is also crucial, according to Queeley. The local Financial Services Commission (FSC) has done an excellent job in regulating and supervising the local insurance sector post-volcanic crisis, but challenges remain due to limited resources and cross-border regulation issues.
Single Insurance Market Project
The ECCB’s single insurance market project aims to create a unified regulatory framework for the Eastern Caribbean Currency Union (ECCU), which could simplify and lower the cost of insurance regulation. However, Queeley warned that more needs to be done to promote general insurance coverage and improve disaster risk management in Montserrat.
Total Damage Cost
- Tropical Cyclone Irma: US$6,794,875
- Turks & Caicos Islands – Tropical Cyclone Irma: US$13,631,865
- Turks & Caicos Islands – Tropical Cyclone Irma -Excess Rainfall policy: US$1,232,767
- The Bahamas – Tropical Cyclone Irma -Excess Rainfall policy: US$234,000
- Dominica – Tropical Cyclone Maria: US$19,294,800