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BELAIR--St. Maarten has to take measures to provide for itself in the event of a disaster, Finance Minister Martin Hassink told attendees at the Henderson Insurances Catastrophe Risk Insurance Conference at the Belair Community Center on Friday.

Hassink said "there was some feeling of security" when St. Maarten was part of the former Netherlands Antilles and the Kingdom of the Netherlands, a fall-back position in case of disaster. He said, however, that after 10/10/10, "this security partly disappeared and together with the fact that our mother country sees us more as a burden than as a blessing, St. Maarten will have to take measures to enable it to provide for itself, specifically in case of disaster."

He said there is a need for St. Maarten to look for closer cooperation and working relations not only with its direct neighbour in French St. Martin, but in the entire Caribbean region, to regain that feeling of security and strength. A relationship with the Caribbean Catastrophe Risk Insurance Facility (CCRIF) could be one such relation.

The minister said much has changed since the devastating natural disaster of Hurricane Luis 19 years ago. There are now stricter building codes, underground cabling and water-flooding prevention to ensure limited business and government interruption. Weather patterns, however, change continuously and nature gains strength and gets more devastating power, he said. "Since 1995, we have been very lucky...Today, I would say what lies clearly at hand is to optimise catastrophe risk management and to seek optimal coverage for the potential damages and cash flow interruptions caused by catastrophes in the region."

According to the minister, St. Maarten's liquidity position is "continuously under great pressure" and varies strongly with the season and is rather weak. Specifically, in times when the threats of catastrophes are the highest (July-November), cash and bank balances are nil or even negative. Parliament recently approved a motion to build up a liquidity buffer of at least US $50 million to be able to absorb external shocks like catastrophes and natural disasters, and which would cover about three months of fixed expenses.

"This would help once, but not when disaster strikes twice. You may say that the risk of several disasters striking within a short period can be neglected, even so and although it's still a realistic risk. The fact is that our operating budget does not have space to rebuild cash reserves in time to the desired and required level to absorb a possible next severe external shock," he noted. Dutch St. Maarten, he added, is a relatively small country with a Gross Domestic Product of over US $1 billion. Government's yearly operating expenditures amount to about US $250 million.

Most of these operating expenses, about 85-90 per cent, are fixed expenses, like salaries and social charges, contracts, rent, etc. Government's average monthly cash inflow amounts to over US $20 million, mainly from taxes on income and taxes on turnover. "The fact is that income is barely covering the operating expenses. The operating account of government should balance, by law, meaning expenses should not exceed income. The country is subjected to strict budget rules and is not allowed budget deficits other than in case of disasters or catastrophes.

However, it's not mentioned or regulated how to finance these deficits caused by a disaster. Again, the operating account does not have enough room to replenish cash reserves to the desired or required level. The risk of structural liquidity problems remains high and can be considered itself a catastrophe in case of catastrophes," he noted. Government does not have something like government interruption insurance, he says.

Managing Director of Henderson Insurance Neil Henderson, who coordinated the conference with the assistance of several sponsors, said the big question this year was whether St. Maarten can afford to forget the impact catastrophes have had on the community. He said while Hurricane Luis is merely a history lesson for persons 18 years and younger, persons who experienced this disaster have a moral obligation to share this experience and equip the coming generations with knowledge and a good state of preparedness to mitigate the impact and associated consequences of a similar catastrophic event.

He said information is key in getting the word out. Henderson said he expected the conference to help simplify the industry, make it understandable and break down barriers of mistrust, intimidation and miscommunication. He said too that clients of insurance products and services can best benefit from solutions if they approach the industry from an educated position.

The keynote address was delivered by Chairman of the Board of the CCRIF Milo Pearson. Also speaking at the conference were NAGICO Chief Executive Officer Dwayne Elgin, Gulf Insurance CEO Jason Clarke and ENNIA Senior Managing Director Gilbert Bernardo-Martina.

Marcel Gumbs was the Master of Ceremonies for the event.