By NEIL HARTNELL
Tribune Business Editor
RoyalStar Assurance yesterday said Hurricane Sandy would wipe out about 22 per cent of its projected 2012 profits, its managing director estimating total insured claims would come in at $4 million on a “net book” basis.
Anton Saunders told Tribune Business that the Bahamian general insurer’s share of those claims would likely reduce its annual net income by $1 million, dropping it to $3.5 million, with reinsurers picking up the majority of the balance.
Of the 150 Sandy-related claims RoyalStar is expecting to receive, Mr Saunders said 90 per cent stemmed from flood damage, with the majority - some 60 per cent - originating from Grand Bahama.
And the RoyalStar managing director disclosed that a claim of around $3-$4 million was likely to be submitted to cover the flood damage at Grand Bahama International Airport. That risk, though, was fully covered by one of its reinsurance providers, meaning no losses will accrue to the Bahamian underwriter.
And, providing Bahamian property insurance consumers with good news, Mr Saunders told this newspaper he expected reinsurance renewals for 2013 to be “flat” compared to this year.
Bahamian property and casualty underwriters buy huge amounts of reinsurance to help them cover risks in this nation, and the price they pay for this cover largely dictates the premium prices paid by consumers here.
Mr Saunders said the Bahamas had “a good story to tell” reinsurers, compared to the storm-related payouts endured in other nations, and this market remained profitable for that sector despite suffering two hurricanes in two years.
Analysing Sandy’s overall impact on RoyalStar, Mr Saunders said: “From out network, it’s going to be a little less than Irene. We’re looking at $4 million from our net book.”
Net book combines both the Bahamian carrier’s and reinsurers’ share of the total claims submitted.
Mr Saunders, though, said Sandy’s ‘net book’ impact was likely to be $1 million, or 20 per cent, less than the $5 million’ worth of claims submitted after Hurricane Sandy.
“We were fortunate,” he added. “When we first saw the storm’s strength and track, we thought it would be higher than Irene. But the final track took it away from Abaco towards the east.”
Grand Bahama, rather than Abaco, was the primary source of RoyalStar’s claims, and Mr Saunders added: “We do have one claim for one of our network providers for the airport, which is coming in around $3-$4 million.
“That’s 100 per cent reinsured. That’s the Grand Bahama Airport - mainly flooding and all the electrical works. That’s [$3-$4 million] what the reserve is now, but we expect it to come in around $2 million.”
Describing Freeport as “a challenge” due to flooding on Grand Bahama’s north coast, Mr Saunders acknowledged that Sandy would impact RoyalStar’s projected 2012 bottom line.
Indicating that the general insurance carrier had been on track to generate net income of around $4.5 million for the 12 months to December 31, 2012, Mr Saunders said the revised projection was still a good performance “given all the circumstances”.
“We still expect to have a good year bar anything else happening,” he told Tribune Business. “Sandy will take about $1 million of our profits, and we’ll still probably be around $3.5 million.
“We don’t like hurricanes, but Sandy is now done, but that’s the nature of our business. We’re prepared for this. If we don’t have hurricanes now and then, we’re in the wrong business. It’s what we’re in business for; we’re here to provide for customers as they provide for us.”
Mr Saunders added: “At the end of the day, we’re probably looking at 150 claims. Ninety per cent of those will be flooding, and there’ll probably be 60 per cent in Grand Bahama, 20 per cent in Abaco, and the balance flooding claims in New Providence.
“There was minimal in Eleuthera, and in the rest of the Family Islands the penetration of insurance is too small to make a difference.”
When it came to any knock-on effects from the devastation wrought by Sandy on the US east coast, Mr Saunders said the states would deal with much of the flooding, while much risk had been retained by the large American insurers.
“The reinsurance loss is going to be marginal, so in this part of the world, the Caribbean, I don’t expect any significant increase for the Bahamas, if any at all,” Mr Saunders told Tribune Business.
“We’ve done very well in the Bahamas considering what the storm did in New York. Construction codes are better in the Bahamas.
“I think they’re starting to make comparisons. Storms hit us and someone else. The Bahamas tells a good story to the reinsurance market. We’ve had Irene and Sandy in the past two years, but reinsurers are still making a profit in the Bahamas.”
And he reiterated: “There should be no significant increase in insurance costs this year. I’m sure some would like to push to have a small increase, but we will resist as much as we can.
“We had a Category Three storm last year, a Category Two storm this year. We can compare our losses, percentage wise of our aggregates, to North America and are doing a better job in the Bahamas.
“We expect a flat renewal; no significant increase in reinsurance costs.”