Losses: ‘The national economy continues to bleed every time we are impacted by a natural disaster’
The devastation caused by thunderstorms to public infrastructure, commercial establishments and residential homes in several parts of the Sultanate over July 15 – 16 has revived calls for the urgent institution of a National Catastrophe Fund & Insurance Pool among other measures, to help the country cope with the damaging effects of adverse weather.
Severe flooding triggered by a low pressure system sweeping over much of the northern half of Oman inundated a number of residential neighbourhoods mainly in Muscat, South Al Sharqiyah, and North Al Batinah governorates.
Raging flood waters breached roads in a number of places, felled electric poles and submerged cars as well, prompting first responders to evacuate many people to safety.
Speaking to the Observer, a senior official of Oman Chamber of Commerce and Industry (OCCI) warned that the absence of a National Catastrophe Fund & Insurance Pool to mitigate public and private sector losses stemming from natural disasters – a longstanding plea of the insurance industry – would continue to impose a heavy cost on the national economy.
“For want of a National Catastrophe Fund & Insurance Pool, which we have advocated for nearly 15 years, the national economy continues to bleed every time we are impacted by a flood event of the kind that we witnessed over the weekend,” said Murtadha bin Mohammed Jawad Ibrahim al Jamalani (pictured), Chairman – OCCI’s Finance and Insurance Committee.
“We are bleeding because the authorities concerned have not taken timely decisions on our proposals for a disaster fund combined with a reinsurance pool to be deployed in the aftermath of adverse weather events.
These recurring insured and uninsured losses resulting from natural disasters are hurting the government and the wider economy,” he lamented.
Calls for the establishment of a special disaster fund date back to 2007 in the aftermath of the devastation unleashed by Tropical Cyclone Gonu, Al Jamalani stated.
“Proposals have been made, meetings convened and deliberations held, but a concrete decision by the authorities concerned is still awaited.”
International experts meeting in Muscat in 2019 as part of the government’s drive to promote Public-Private-Partnership (PPP) ventures in the Sultanate had also stressed the need for adequate insurance to secure such investments from natural disasters, said the official. “They warned that perils posed by catastrophes in the form of insured and uninsured losses need to be suitably addressed if infrastructure-based investments in particular are secure and sustainable.”
Adding urgency to the need for a National Disaster Fund is the rising frequency and severity of adverse weather events in the Sultanate, he pointed out. “The government cannot afford to keep repairing and rehabilitating roads and other public infrastructure whenever disaster strikes.
Most state-funded public infrastructure is presently uninsured in line with longstanding government policy, which is no longer tenable in light of the growing frequency of disasters. It will be prudent to insure all such infrastructure through the creation of a National Fund. This change in financial policy is long overdue.”
Among the proposals championed by the insurance companies through the Chamber is the rollout of a nationwide zoning mapping initiative that calls for an insurance premium to be charged on properties and investments developed in areas prone to harm in the event of adverse weather events.
Consequently, developments in the close proximity of wadis, low-lying areas, rock and mudslides, and unprotected waterfronts, are liable to pay a premium under these zoning proposals.
“The government is required to work with insurance companies jointly to come up with appropriate financial strategies to enable protection to national assets and safeguard the interests of all stakeholders against natural and human catastrophes.
As disasters are fortuitous events, there is no time to waste. Worse, if no action is taken by the authorities, international reinsurance companies may, sooner or later, withdraw their support to local insurance companies in coverage of Storm, Tempest and Flood (STF) damage. We have seen the massive flood-related damage in Europe last week. The insurance and reinsurance market may revise their terms and conditions in light of these serious developments.”