Annual
of the Catastrophe Fund 2010
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LETTER OF TRANSMITTAL September 2nd, 2013 The Honourable Christopher Sinckler, M.P. Minister of Finance and Economic Affairs Government Headquarters Bay Street ST. MICHAEL Dear Minister: In accordance with Section 10 of the Catastrophe Fund Act, 2007-5, I have the honour to submit to you in your capacity as Minister with responsibility for Finance, the Report of the Catastrophe Fund for the year 2010. Kindly note that at the time of preparation of the report, the audit of the accounts had not been completed. The report of the Auditor General will be forwarded to you as soon as it becomes available. Yours faithfully,
Dr. Justin Robinson Chairman National Insurance Board
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BOARD OF DIRECTORS Ms. Sandra Forde – Chairman (January – February) Mr. Keith “Tony” Marshall – Chairman (March – December) Dr. Justin Robinson - Deputy Chairman Mr. Neil Marshall (January – February) Ms. Annice Dalrymple (March – December) Mr. Dennis Clarke Mr. Jon Martineau Sir Allan Fields Mr.Vincent Burnett Mrs. Nancy Headley Senator Sir Roy Trotman
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NATIONAL INSURANCE BOARD Report on the operations of the Catastrophe Fund for the period 1 January to 31 December 2010.
INTRODUCTION The Catastrophe Fund Act, 2007 commenced on 8 March 2007. The purpose of the Fund is to provide financial aid to any low income earner who owns and occupies a chattel house where
(a)
the value of the house does not exceed $150,000 and
(b)
the house is damaged or destroyed by a catastrophe.
ESTABLISHMENT OF THE FUND Section 3(2) of the Catastrophe Fund Act, 2007-5 states that the Fund shall consist of: (a)
annual contributions with effect from financial year 2006-2007 in the sum of $2.5 million voted by Parliament for the purposes of the Fund for a period of not less than 5 years;
(b)
monthly contributions payable with effect from financial year 2006-2007 by every employed person and self-employed person in the amount of 0.1% of the earnings on which that person pays national insurance;
(c)
amounts realised from investment proceeds and
(d)
monies that may accrue from the operations of the Fund.
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ENTITLEMENT TO CLAIM Section 5 of the Act provides as follows: (1)
Any owner of a chattel house valued not more than $150,000 who occupies that house and who earns less than $25,000 annually is, from financial year 2006-2007, entitled to a grant in such amount as is determined by the Committee in accordance with regulations made under this Act, where that house is damaged or destroyed by a catastrophe.
(2)
Where a house is constructed of both wood and brick, that house shall be regarded as a chattel house for the purposes of this Act, if the house is, in the opinion of the Committee, substantially constructed of wood.
(3) For purposes of subsection (2), a house is substantially constructed of wood if at least 75% of the house is wooden. Effective 2008-04-01 the value of the chattel house and the annual earnings of the owner were increased from $125,000 and $22,500 to $150,000 and $25,000 respectively.
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CATASTROPHE FUND CLAIMS COMMITTEE Claims are to be determined by a committee provided for in Section 6 of the Act as follows: (1)
There shall be a Catastrophe Fund Claims Committee which shall be responsible for the consideration and assessment of claims and the issue of grants.
(2)
The Catastrophe Fund Claims Committee shall consist of 6 persons, namely:
(a)
the Supervisor of Insurance, ex officio;
(b)
the Director of National Insurance, ex officio;
(c)
the Chief Fire Officer, ex officio;
(d)
the Accountant General, ex officio; and
(e)
two persons who shall be appointed by the Minister by instrument in writing.
(3)
The Minister shall appoint one of the members to be Chairman and another member to be Deputy Chairman.
(4)
Claims may be made to the Committee in such form as may be prescribed by regulations.
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MANAGEMENT OF FUND The Act has assigned responsibility for the management of the Fund to the National Insurance Board. Section 7 provides as follows: (1)
The contributions shall be paid to the National Insurance Office.
(2)
The National Insurance Board shall be responsible for the management and investment of the Fund.
(3)
The following payments may be made from the Fund
(a)
the payment of grants;
(b)
refunds of any payment paid in excess or in error and
(c)
the expenses incurred in respect of the administration of this Act.
GENERAL Committee Meetings During the period under review, the Catastrophe Fund Claims Committee was constituted as provided for in the Act. Mr. William Tomlin and Mr. Algernon Leacock were Chairman and Deputy Chairman respectively. No claims were received during the year. Board Meetings The Board held eleven meetings during the year at which matters related to the Catastrophe Fund were discussed.
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FINANCIAL OPERATIONS Revenue Total revenue for the year under review was $6,334,152. Of this amount, $3,170,467 represented contributions collected from employees and self-employed persons during the year and $663,685 represented investment income. In addition, $2,500,000 was received by the Fund in respect of contributions voted by Parliament as provided for in sub-section 3(2) of the Act. Contribution income from employees, self-employed and Government accounted for 89.5% of total revenue. Table1 below shows the contributions and investment income distributed on a monthly basis.
Month
Investment Contribution & Contributions ($) Income ($) Investment Income ($)
January February March April May June July August September October November December Total
270,824 250,463 261,109 249,494 209,399 232,569 234,883 229,260 279,120 205,578 269,360 478,408
50,559 50,266 47,425 51,884 54,024 52,880 55,555 58,315 60,002 61,110 58,894 62,771
321,383 300,729 308,534 301,378 263,423 285,449 290,438 287,575 339,122 266,688 328,254 541,179
$3,170,467
663,685
3,834,152
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Table 2: Investment Income by Asset Class - 2010 Catastrophe Fund Type of Investment Investment Income ($) Distribution % Treasury Bills Deposits Total
136,993 524,643
20.71 79.79
661,635
100.0
Expenditure There was no expenditure during the year in respect of claims as a result of a catastrophic event. In 2010, total expenditure incurred in the administration of the Fund totalled $27,900. This amount was paid to the National Insurance Fund as the Catastrophe Fund’s share of the administration expenditure of the Office. Table 3: Expenditure for the Catastrophe Fund - 2010 Month January February March April May June July August September October November December Total 8
Administration Expenses ($) 2,998 2,297 2,412 2,118 2,742 2,444 2,377 1,760 1,822 2,341 2,119 2,470 27,900
Fund Balance (i)
Status of account balance
At 31 December 2010, the assets of the Catastrophe Fund totalled $26,032,269 and were distributed as follows: Investments Cash and bank balance Interest receivable Contribution receivable Other Receivables Total
23,867,279 248,031 310,307 1,537,733 68,919 26,032,269
Table 4 shows the distribution of the Fund’s investments. Table 4: List of Investments as at 31 December 2010 Type of Investment Deposits Treasury Bills Total
Portfolio ($)
Portfolio %
15,607,973 8,259,306
65.4 34.6
23,867,279
100.00
The Fund’s ending balance at 31 December 2010 was $30,411,534. General The 2010 financial statements have not been submitted for audit.
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PROSPECTS FOR 2011 The Central Bank of Barbados has anticipated that the economy should expand by two percent in 2011 as tourism continues to improve. The expected economic growth will depend on a full recovery in the tourism sector, general revival in global activity and private capital projects such as Port Ferdinand. Due to the expected claims expenditure during 2011, as a result of the passage of Tropical Storm Tomas on October 30, 2010, it is expected that demands for financial aid will be made on the Fund. It is not expected that the investment portfolio will increase. Investment income is therefore estimated at $0.68 million based on the ending portfolio balance and assuming an average return of 3% on the portfolio. It is expected that Government will make its annual contribution of $2.5 million in 2011 which will result in total revenue of $5.93 million. Administration Expenditure for 2011 is projected at $27,544. This fee will remain in the National Insurance Fund and net contributions will be transferred to the Catastrophe Fund. The Ministry of Home Affairs has confirmed that the damage assessment phase is still in progress and that the sum of $17 million is expected from the Caribbean Catastrophe Risk Insurance Facility. An amount of $5 million has been budgeted for payment of grants from the Catastrophe Fund to qualifying claimants.
CONCLUSION The National Insurance Board expresses its appreciation to the Director and staff for the service rendered in managing the Catastrophe Fund during the year.
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