The truncated toolkit: disaster risk finance and the limits of autonomy in the Dutch Caribbean

This working paper examines how Aruba, Curaçao and Sint Maarten finance disaster recovery and why they make limited use of modern disaster risk financing instruments despite their high exposure to natural hazards. Drawing on comparative analysis across Caribbean jurisdictions, the paper explores the implications of relying primarily on foreign reserves to finance disaster recovery and assesses the economic and governance trade-offs of this approach.

The paper argues that the constitutional architecture of the Kingdom (the Statuut and its Rijkswetten) forecloses the top layer of the standard disaster-risk-financing toolkit, sovereign market access, so risk transfer is routed instead through corporatized sector vehicles such as the GEBE utility's CCRIF policy and the PJIAE-capitalized Sint Maarten Disaster Reserve Fund. The more accessible layers, parametric insurance and contingent credit, stay underused for institutional rather than statutory reasons. Reserves act as "instrument zero," an implicit buffer that is carried but rarely spent as a disaster fund; when large shocks landed (Irma, COVID) the real backstop was Dutch grant and liquidity support, not a reserve drawdown. Using an illustrative opportunity-cost calculation for Aruba against GFDRR average-annual-loss and probable-maximum-loss estimates, it shows the cost of self-insuring through idle reserves and sketches a fuller, layered financing strategy. It closes by inviting the named monetary and fiscal institutions to respond.