Belize relies heavily on climate for agriculture, fishing, forestry and tourism industries; making them especially vulnerable to natural disasters that threaten economies and creditworthiness.
Investors have reported that Belize’s incentive regime does not always meet their needs, land titles are often not secure and bureaucratic delays or corruption can create impediments to conducting business in Belize.
Protection from Natural Disasters
The agricultural sector is highly vulnerable to natural disasters and climate change, which can have devastating repercussions for its economy. Such threats include drought, hurricanes, flooding and sea level rise as well as coastal erosion and coral bleaching; climate change will likely exacerbate this risk further in future.
Insurance can help protect against the effects of natural disasters by offering coverage against crop failure and income loss – two direct results of natural disasters. It also can provide financial support for rebuilding damaged infrastructure as well as replacing farmland damaged by these events.
Belize’s agriculture relies heavily on rain-fed farming methods; when rain fails, farmers cannot cultivate their fields and their income decreases dramatically. Drought can be reduced by investing in irrigation systems which will increase water availability to plants while simultaneously decreasing rainfall-dependent irrigation needs.
Additionally, the insurance market can help provide relief in times of floods by offering protection from loss of crops and income as well as damage to agricultural infrastructure and disruption to services like electricity and water.
Recent natural disasters in Belize have greatly disrupted its sugar cane industry, including flooding fields and equipment destruction, leading to an increase in demand for insurance in this sector. To meet this growing need, both the Government of Belize and Belize Sugar Cane Farmers Association (BSCFA) have set up a joint venture providing crop insurance that covers losses from harvesting season 2016. Furthermore, BSCFA intends to establish a microinsurance scheme to assist small-scale producers rebuild their farms after such disasters have hit.
Belize’s insurance market is overseen by the Office of the Supervisor of Insurance and Private Pensions, who regulate the establishment and operation of insurance entities as well as sales and marketing of products. Furthermore, their act also sets forth terms and conditions for licensing insurers – categorizing international insurers, captives and reinsurers among others.
Crop Failures
Belize’s agriculture sector accounts for 11% of GDP and is thus highly vulnerable to natural disasters and climate change, already experiencing flooding, land loss, droughts, sea level rise, coral bleaching and increased weather volatility due to climate change impacts such as flooding. Further climate-related effects like these will only become more evident as global temperatures continue to increase.
Belize has long prioritized investments in climate resilience-building as part of their National Adaptation Plan for Climate Change, created before Belize submitted their NDC to the Paris Agreement in 2015. This plan includes an in-depth assessment of climate risks and vulnerabilities to guide decisions about adaptation efforts for future.
As part of their assessment, the government identified the most urgently required interventions to address climate change risks across multiple key sectors including agriculture/food, forestry, water, tourism and coastal management. These measures are reflected in their climate change adaptation budget with significant investments already made towards resilience-building projects.
Additionally, the government of Belize operates a state-owned development bank which facilitates lending for reforestation, rural development and small and medium enterprises. Furthermore, The Bank of Belize offers insurance policies to protect clients against natural disasters.
Belize accounted for 59% of agricultural credit granted in 2010. Other crops such as sugar cane and citrus were less prevalent.
Belize farmers can be especially vulnerable to financial instability as they invest heavily in their farms while having limited access to capital markets. To address this situation, the Bank of Belize has made strides toward strengthening Belize’s microinsurance market with affordable microinsurance products covering both property damage and income loss costs.
As part of its efforts to support the microinsurance market, the bank has also been working towards improving women’s financial inclusion. Raising awareness about the significance of insurance can help protect them in times of disaster and will hopefully encourage more women to acquire this coverage.
Damage to Equipment
Insurance provides Belize’s agriculture industry with vital protection against damage to their costly equipment, which may include tractors, harvesters, harvester headers or more specialized machines like greenhouses or pesticide sprayers. Farmers who experience loss can recover more easily while continuing to produce crops for market.
Insurance policies offer financial relief to small and mid-sized farms during times of distress, such as when hurricanes damage irrigation systems or an infestation causes their crop not to sell at market. Covering those losses may help preserve their profitability.
Even with its economic gains, agriculture and food sector still face numerous challenges for their future success. Significant investments must be made in value-added investments such as processing or food packaging in order to increase productivity, increase revenue for farmers and reduce dependence on exports for support of their families.
Value-added investments will improve efficiency and profitability by improving warehousing, transportation, marketing, irrigation systems and better-quality farming equipment that will boost yield per acre. Belize can further bolster food security and economic resilience by investing in disease prevention strategies, natural disaster mitigation measures and climate resilience strategies.
Apart from high land costs, an unreliable property title system has become another significant barrier to foreign investments. Land disputes involving these foreigners have surfaced due to falsified or fraudulent records; there have also been allegations of government corruption related to these claims.
Belizean government has created several commercial free zones which provide tax exemptions for international business operations; however, these benefits do not extend to local or domestic companies. Furthermore, limited redress mechanisms exist and no Ombudsman exists for private citizens or businesses in Belize.
Assureds seeking full compliance with Belizean regulations require in-depth information about its insurance market. Our Belize Insurance Governance Regulation report offers insurers such intelligence on this front, offering in-depth details into the regulatory framework and market practices affecting life, general, property, automobile, liability personal accident as well as marine aviation and transit insurance policies.
Loss of Income
Belize’s agricultural sector is vulnerable to income losses caused by climate change. Due to Belize’s tropical climate, which makes the nation susceptible to extreme weather events such as drought, flooding, hurricanes and frost – its agricultural sector must have access to financial support that covers any losses due to adverse weather conditions in order to remain competitive on international markets.
Insurance provides farmers with additional protection from fluctuating market prices. This is particularly vital in Belize’s sugar cane industry, where oil price fluctuations impact production costs directly. Insurance can help farmers hedge against fluctuating oil costs by offloading some of their risk to another party.
Farmers can benefit from insurance when forced to abandon their fields for redevelopment or other reasons, which can cause income losses that can be difficult or impossible to regain. Insurance provides coverage against this loss and provides them with a source of income until they return to their fields.
The new act brings Belize into line with the Insurance Core Principles set out by the International Association of Insurance Supervisors (IAIS), moving away from a rules-based framework towards one that utilizes risk-based supervision while still upholding high levels of financial integrity and meeting FATF recommendations.
As such, this new law is expected to strengthen Belize’s insurance market and increase consumer protection while strengthening economic stability through providing a stronger regulatory environment.
Belize is an open economy whose GDP relies heavily on agriculture, tourism and services. Due to its proximity with the United States, consumer products manufactured there can find ready markets here; furthermore, its labor force boasts highly trained skillset. Unfortunately, allegations of government corruption and economic mismanagement have led to protests such as business shut-downs and nonviolent public demonstrations over recent years – sparking nonviolent demonstrations from business shut-downs to business shutdowns.
