Understanding CDAL's "Self-Insurance" of Jolly Harbour Common Areas

1. Introduction

Many Jolly Harbour property owners have learned that Caribbean Developments (Antigua) Limited ("CDAL") no longer purchases external insurance for the assets and infrastructure it owns. CDAL often refers to these as "community assets," but in reality, freeholders only own their individual parcels—the roads, pathways, water pipes, and other installations are owned by CDAL itself, not by a "community" association or body corporate.

Instead of buying policies from third-party insurers, CDAL has opted for a "self-insurance" strategy, channeling certain funds into what was once called the "Sinking Fund" (now re-labeled as the "Property Self Insurance" fund). This development raises concerns about whether it satisfies the Land Transfer requirement for "liability and risk insurance for common areas," and whether owners risk facing additional assessments if CDAL's reserves prove insufficient in a catastrophic event.

Below, we draw on two core references:

1. 2024 Budget Q&A (where owners inquired about this self-insurance approach).
2. Memo from CDAL's Chief Financial Officer addressing the high cost of traditional insurance and describing CDAL's new plan.

Finally, we offer a suggested message template for owners wanting proof that CDAL's self-insurance adequately fulfills the covenant set out in the Land Transfer agreement.

2. Relevant Covenant Requirement in the Land Transfer

In short, each property owner pays a monthly fee that includes coverage for "liability and risk insurance" on facilities—owned by CDAL—used for the overall operation of Jolly Harbour. Traditionally, "insurance" suggests a policy purchased from a regulated insurer, but here, CDAL has opted to "self-insure" its own assets.

3. What the 2024 Budget Q&A and CFO Memo Reveal

4. Legal Analysis Under Antiguan and British Common Law

5. Practical Implications for Jolly Harbour Owners

1. Minimal Fund Could Lead to Special Assessments

   CDAL's Q&A indicates only US$90k accumulates yearly. If a hurricane causes, say, millions of dollars in damage, owners might face large, immediate assessments.

2. Demand More Transparency
   • Are the self-insurance funds strictly segregated from CDAL's operational accounts?
   • Is there an external audit verifying the "insurance reserve" matches a realistic risk assessment?
3. Right to Proof
   • If the covenant states "CDAL shall insure" but no third-party policy exists, owners can ask for official documentation demonstrating self-insurance is robustly funded.
   • They may also request a cost-benefit comparison showing that standard insurance would be more expensive.

6. Suggested Message Template

Below is a template letter you can use to formally inquire about the self-insurance arrangement:

Subject: Request for Information Regarding Self-Insurance Compliance

Dear [Name/Title at CDAL],

I hope you are well. I am contacting you about the "self-insurance" arrangement for Jolly Harbour's roads, pipes, and other CDAL-owned infrastructure, in light of the Land Transfer covenant requiring "liability and risk insurance for common areas." Since these assets belong to CDAL—not the homeowners—please explain how the self-insurance strategy aligns with the covenant's requirement to protect the property on which we rely, and whether we can count on adequate coverage.

1. Definition of Self-Insurance Coverage
    • Which specific assets and liabilities (e.g., hurricane damage, public liability) are covered?
    • What limits apply if a large-scale event exceeds the annual $90k "reserve"?

2. Financial Reserves and Audit
    • How much is contributed annually?
    • Is this account segregated from CDAL's general finances?
    • Could you provide audited statements or a balance sheet detailing the reserve's adequacy?

3. Compliance with "Insurance" Requirement
    • Has there been legal or professional confirmation that setting aside $90k/year suffices to meet the contractual stipulation to "insure" these assets?
    • Are owners at risk of major special assessments if a catastrophic loss surpasses the self-insurance fund?

4. Comparisons to Traditional Insurance
    • Have you analyzed whether a standard insurance policy might offer more comprehensive risk coverage, especially in the event of hurricanes or large claims?

5. Future Funding & Reporting
    • Will owners receive routine statements to monitor how self-insurance reserves are managed or used?
    • If shortfalls occur, how will CDAL manage the deficit without improperly passing on those costs to owners?

Thank you for your prompt attention. If the self-insurance arrangement truly meets the covenant's "liability and risk insurance" requirement, documentation or an external audit would clarify how. In the absence of such proof, owners may need to review whether CDAL is fulfilling its obligations under Antiguan and British common law. I look forward to your timely response.

Sincerely,
[Your Name]
[Parcel / Address]
[Date]
[Contact Information]

7. Conclusion

While CDAL labels roads, pipes, or other structures as "community property," they remain CDAL-owned assets—not property of a "community association." The Land Transfer covenant, however, mandates that part of each owner's monthly charge goes toward ensuring these infrastructure elements are properly insured for liability and risk.

Ultimately, only thorough documentation and accountability can show that self-insurance aligns with the Land Transfer covenant's insurance clause—truly safeguarding owners from catastrophic risks that otherwise might fall onto them if CDAL is underfunded.