Hurricane Melissa is rampaging across the Caribbean as Western governments slash the foreign aid budgets that can help island countries recover.
But one Caribbean country has been making preparations of its own: Jamaica, which suffered billions of dollars in damage Tuesday from the Category 5 hurricane.
Jamaica has built an arsenal of financial tools to help after natural disasters. The country can quickly raise up to $820 million through a mix of savings, credit lines and insurance policies, Finance Minister Fayval Williams said in June.
Access to those funds will speed the country’s recovery, despite the damages from Melissa far exceeding that coverage, said Conor Meenan, a risk finance adviser with the U.K.-based Centre for Disaster Protection.
“Having certainty around access to immediate liquidity of up to $820 million [will] put Jamaica in a better place than if they hadn’t developed their strategy to this level,” Meenan said in an email.
Melissa likely caused $7.7 billion of damage in Jamaica, according to catastrophe modeler Enki Research. Andria Grosvenor, planning manager at the Caribbean Disaster Emergency Management Agency, said Wednesday during a remote briefing that western Jamaica was hit with catastrophic winds, flooding, landslides and up to 30 inches of rain. Hundreds of thousands lost power and three died.
The hurricane — one of the strongest to ever form in the Atlantic — hit as the U.S. and other Western countries make cuts to foreign aid, raising fears that developing nations will struggle to recover from natural disasters.
The Organisation for Economic Cooperation and Development projects rich countries will reduce foreign aid by 9 percent to 17 percent this year, deepening cuts from 2024. France, the United Kingdom and Germany — which has been the second-largest contributor of foreign aid after the U.S. — have all announced large cuts.
Marc Cohen, senior associate with the Humanitarian Agenda at the Center for Strategic and International Studies, said Jamaica and other Caribbean countries “have made substantial investments in disaster management.”
But, he added, “I’m quite concerned that there will be a not-very-robust response from the United States, particularly as compared to past storms.”
President Donald Trump has slashed annual foreign assistance funding to $13 billion, a quarter of its historical average, according to Georgetown University’s School of Foreign Service. He has eliminated the U.S. Agency for International Development, which spent $22.1 million in Jamaica last year.
The State Department said disaster teams are heading to Jamaica to work with the government at assessing needs and targeting assistance. A department Disaster Assistance Relief Team went to the region before Melissa made landfall, and two urban search-and-rescue teams were on their way Wednesday.
“The president has pledged assistance given the size of this disaster,” Michael Lavallee of the U.S. embassy in Jamaica said during a remote briefing organized by the U.S. Chamber of Commerce.
Defense Secretary Pete Hegseth is evaluating a State Department request for help from the U.S. Southern Command, said Southcomm spokesperson Shawn Powell during the briefing.
Hurricane damage was concentrated in western Jamaica, home to the island’s renowned beaches and resorts, Lavallee said. Kingston, the capital, in eastern Jamaica, “was significantly spared,” Lavallee added. “There doesn’t seem to be anything that will have a long-term impact on Kingston.”
Homeowners’ insurance is scarce
Jamaica is the third-most-exposed country in the world to natural hazards such as hurricanes, floods, droughts and landslides, according to the World Bank’s Global Facility for Disaster Reduction and Recovery. About 70 percent of its population lives within 3 miles of the sea, according to ACAPS, a Swiss organization that does research to support humanitarian efforts.
Jamaica began building financial protection against disasters and climate change as part of a larger effort to reduce debt and protect its economic growth against worsening extreme weather, said Meenan of the Centre for Disaster Protection. Roughly one-third of Jamaica’s economy comes from tourism.
Only about 5 percent of households in the nation of 2.8 million people have property insurance, according to AM Best, an insurance analysis firm.
“Insurance is unfortunately not a significant part of [recovery] given the insurance penetration in these regions is pretty low,” AM Best Senior Director Sridhar Manyem said in an interview, referring to Caribbean nations. “The disaster recovery is going to be dependent on assistance from other governments, whether it be the U.S., the U.K. or Canada.”
Bridget Maehr, a director at AM Best, said few Jamaica residents can afford property insurance, which “is expensive because they are in a region that is exposed to catastrophic events.”
Jamaica instead relies on complementary financial tools that activate depending on the type of disaster that strikes. When triggered, the instruments immediately provide cash for emergency response, households and other recovery needs.
“The idea is that we should always be able to access resources from some instruments for every storm,” Nigel Clarke, Jamaica’s former minister of finance, said last year.
Speed is crucial, said Gaia Larsen, director of climate finance access at the World Resources Institute. “The quicker you get resources to people, the less damage there is,” she said in an interview.
Jamaica and other developing countries are increasingly using such “prefinancing” tools because catastrophes were forcing governments “to go out and try to find money [afterward],” Larsen said. “If the money’s not prearranged, sometimes it takes a long time. Sometimes it doesn’t show up at all.”
Jamaica is ‘different’
Caribbean nations are known for using financing mechanisms to set aside cash before disaster hits. But Jamaica stands apart for its diverse mix, experts said.
For frequent, low-severity events such as localized flooding, Jamaica uses its general budget or reserve funds to set aside for natural disasters, Williams, the finance minister, said in June.
For more damaging incidents, Jamaica has prearranged credit lines with the Inter-American Development Bank and the World Bank that can rapidly provide up to $460 million, according to Meenan.
Jamaica also buys insurance policies from Caribbean Catastrophe Risk Insurance Facility, a disaster insurer set up by regional governments in 2007 that is funded through premiums and donations from rich countries. CCRIF sells disaster insurance to 23 governments in the Caribbean and Central America.
Jamaica has $210 million of insurance coverage from “parametric” policies that make payouts when a predetermined event occurs, such as rainfall exceeding a certain level or winds reaching a certain speed.
The country also has a $150 million catastrophe bond that the World Bank issued on its behalf in 2024. Governments and other issuers sell cat bonds to investors, who get their money back with interest unless a disaster occurs and the issuer cashes in all or part of the bond.
“There’s lots of reasons governments don’t plan for disasters. Jamaica is a different paradigm,” Meenan said in an interview. “It shows that if there’s the will, then it’s possible to put in place comprehensive strategies against uncertain risks or increasing risks in a changing climate.”
Melissa’s “level of intensity could trigger a 100% payout once it’s confirmed by an independent reviewer,” said Chris Lefferdink, head of insurance-linked securities, North America, at Aon Securities, in an email. Aon designed the bond.
Before Melissa hit the Caribbean, the United Nations’ World Food Program worked with the governments of Jamaica and the Dominican Republic to give vulnerable households cash. In Cuba, the program prepositioned enough food to feed 275,000 people for almost a week.
“Food prices spike during crises. If you can buy early, you save money,” Richard Choularton, director of climate and resilience services at the World Food Program, said in an email.
“Also, the longer children go without clean water and adequate nutrition, the more they need expensive treatments for malnutrition and health care,” he added. “Time savings translate to real savings.”
