Beyond Paradise: Evolving Risks in the Caribbean

'Island Culture' Considerations and Exposures

Crescent beaches, turquoise waters, palm trees rhythmically swaying in the warm trade winds, and luxurious resorts catering to your whims are the lures of a Caribbean visit. It is a carefree time to unplug, reconnect with family, and spend carefree hours lounging, touring, and dining. Far are the thoughts of our daily routines and the usual caution we carry during our working or homebound lives.

A Caribbean paradise simply has that effect on those of us lucky enough to travel there for vacation or for business, making us the envy of our colleagues. Thousands of American and European tourists and business visitors join the migrating flocks heading south for the winter. Waiting expectantly is an equal number of international corporate and local businesses. Having survived another austere off-season, there is hope tempered with recession economy fear, that it will be a season of positive metrics and margins.

There is, however, a more sinister side to the Caribbean. An often ignored side that must be considered when evaluating personal and business line risks. Consider that the Caribbean islands are a mixed conglomerate of sovereign nations, self-governing commonwealths with mixed civil and common law, and territories ruled by the laws of a number of European Union members. There are many cultural influences including Spanish, French, African, Creole, and more, creating unique cultural nuances that are distinct to each island. They can be as different from one another as any culturally diverse group of nations that are bound only by the same region.

There are important characteristics for consideration that are shared by many of them. They have what I call an “island culture.” They are generally very small land masses and therefore people tend to know one another or at least know about each other. Many are related to one another to some degree. Many have gone to school or work together. As a result, there are no secrets on the islands. If you have a private conversation in a restaurant you can be sure by the following day the information has spread throughout the community. Well-off residents generally know someone who is a local government official of one type or another. Favors are bartered, “grease payments” or petty corruption are a way of life and expected in order to get anything done. They have no vested interest in hurting the business or tourist trades by documenting crime occurrences, which would generate negative crime statistics. They are suspicious of one another, but united in their feelings that tourists and businesses “owe them” as a result of benefiting from their island.

This is the stage that is set for foreign businesses, visitors, and your insured interests alike. It is a stage dressed with diffuse poverty resulting from a lack of economic development and other factors that allows for high murder and serious assault rates. Armed robberies, sexual assaults, burglaries, and larcenies are prevalent and increasing. Businesses suffer from internal crime of every type known. The murder rate is as high as 30 per 100,000 people, as reported by many news periodicals including The St Thomas Source. For comparison, the USA and some European murder rates are 4.8*, and as low as 0.5* per 100,000 people, respectively. Serious corruption exists in many facets of the police and government and in many businesses. This means that civil litigation and criminal proceedings are severely slanted in favor of a citizen’s or island’s interests.

“Can't beat 'em so join 'em,” you think?

Well, Americans are subject to the Foreign Corrupt Practices Act (FCPA) which is applied criminally by the Department of Justice and civilly by the Securities and Exchange Commission. Serious penalties await those who cross their trip wire.

The British have a similar act that is often described as the American FCPA on steroids. Note that both acts will apply to foreign nationals as well, if certain conditions apply. One example is for a foreign national to forward an illicit payment through an entity that is chartered in the U.S. or Britain. The acts will be applied and serious efforts will be made to pursue nationals and foreign nationals alike.

The problems for the Caribbean have become more complex and serious within the last decade as a result of unrelated events in North and South America, reflecting the law of unintended consequences. A combination of political and law enforcement factors have led to the decline of the South American drug cartels. As the American governments place more pressure on the North American drug distribution routes, and according to the U. S. State Department, inter-cartel rivalries resembling small army unit combat actions with grenade launchers, heavy automatic weapons, and well trained combat snipers, and as, unbelievably, the illicit manufacturing and deploying of drug smuggling submarines intensifies, the cartels have sought distribution routes that meet less resistance. Enter the Caribbean islands that form a natural land mass chain from South America to 200 miles off the Florida coast.

Add in all of the above problematic ingredients of Caribbean governance, business, and culture, coupled with the need for the drug cartels to develop new less risky distribution routes, and you have all of the ingredients that have made the Caribbean a new major drug importation route. The natural byproduct is gang warfare, serious violent crime, kidnap for ransom, formerly unheard of use of weaponry in street-crime, along with the associated official and business corruption.  

Many of the major global carriers no longer write primary standard risks in the Caribbean. This has been left to local non-standard companies and Lloyds syndicates; ditto for the banking sector. Yet, you can unintentionally face these difficult to manage risks.

The global economy demands increasing business travel to all points including the Caribbean. Vacation and extended personal travel are more prolific even during the economic downturn as air and sea carriers and the hospitality industry make drastic cuts to attract Caribbean bound travelers. Time shares, property and second home ownership are more common today. As a result, many of your insurable interests may be at higher risk than originally believed. Perhaps it is time to re-evaluate risk management for life, disability, accident and health, property and various business policies, including kidnap for ransom.

There are some islands that are not as severely affected with these risks as others. Those that have strong economic infrastructures generally are flourishing. They face other types of risk though, including, but not limited to financial, fiduciary, and contractual risks. All cited risks can be reasonably managed by consideration of enterprise risk management (ERM) methods with a unique practical management approach, which will be the focus of our next article.

Page 1 of 3
Comments

Resource Center

View All »

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.