The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First’s chief executive yesterday said it would “be safe to assume” that Hurricane Sandy’s insured losses “will not be any less” than the $28-$30 million in claims the company incurred last year from Hurricane Irene.

Patrick Ward, who is also the property and casualty insurer’s president, also acknowledged that the storm would have “a material impact” on the industry’s 2012 profitability, although he expected most underwriters would remain in the black.

And, potentially more significant for Bahamian insurance prices going forward, is the damage Hurricane Sandy will wreak on the US East Coast.

That area has a huge concentration of expensive, insured assets, and major losses could hurt the world reinsurance market. Given that Bahamian property and casualty underwriters buy huge amounts of reinsurance to help them cover risks, major Sandy-related losses in the US could force up reinsurance prices - resulting in a knock-on effect that raises premiums in the Bahamas.

That is still a major unknown, and Mr Ward told Tribune Business it was still “pretty difficult to be precise” about the level of insured damages and losses in the Bahamas.

Disclosing that Bahamas First was “getting a mixed bag of reports” from areas that had been hardest hit by Sandy, Mr Ward added: “There are some people, depending on who you are speaking to, saying the damage is expected to be worse than Irene.

“But, at the same time, persons in the same location are saying the damage is not so bad, apart from some flooding.”

The Bahamas First chief added: “We’re trying to get a more objective assessment at the main locations, which are Abaco, Eleuthera, Cat Island, Exuma and parts of New Providence, particularly the west and north coast.”

Mr Ward said international loss adjusters were already arriving in the Bahamas, and locally-based companies in that niche were organising teams.

Loss adjuster teams will be organised to deal with specific island locations, Mr Ward said, adding that as they began their work Bahamian carriers would seek to “get persons’ claims processed as quickly as possible”.

He acknowledged that Bahamas First, though, had a “significant concentration” of insured risk in islands such as Abaco and Eleuthera, which took the brunt of Sandy.

The carrier incurred the ion’s share of Irene-related claims in 2011, that storm travelling a similar path to Sandy, and Mr Ward said his initial expectations were for a not dissimilar experience in 2012.

“If I had to guess at this point, it would be safe to assume it wouldn’t be any less,” Mr Ward told Tribune Business, when asked to compare Sandy’s likely insured losses to Irene’s,.

He confirmed that the Bahamian general insurance industry paid out between $40-$50 million worth of claims stemming from Irene, with Bahamas First’s share standing at $28-$30 million.

Asked about Sandy’s likely impact on industry bottom lines for 2012, Mr Ward told this newspaper: “It’s going to have a material impact.

“I think most companies will probably trade profitably, but the extent to which that will be the case will be significantly impacted by losses arising out of these claims.”

However, Tom Duff, general manager of Insurance Company of the Bahamas (ICB), the carrier through which BISX-listed J. S. Johnson places much of its business, said its initial expectation was that its claims would be slightly less than Irene.

ICB experienced $6.7 million in gross claims from Hurricane Irene, but Mr Duff said he had been told one of its “major risks in Exuma” had reported no damage from Sandy.

“In the absence of any reports, thus far my expectation is that the losses for ICB will be a little bit less than Irene,” Mr Duff told Tribune Business.

“Certainly, it will not be any more than Irene based on early assessments. Here in New Providence, we do expect to receive some claims from flood-damaged properties in the western area, and had yet to hear from Abaco and Eleuthera.”

Mr Duff said he expected the claims composition to be different in 2012. While most Irene-related claims were for wind damage. With Sandy he was expecting to receive more flood-related claims.

And the ICB general manager added that the carrier did not have any exposure to the flood-prone Queen’s Cove area in Grand Bahama, having followed the rest of the market in reducing exposures on the island following the 2004 hurricane season.

Asked about Sandy’s likely impact on company profits, Mr Duff told Tribune Business: “We were performing just ahead of budget for the year before Sandy - we were on target to exceed budgeted trading profits.

“It clearly will have some impact. Whether that results in a drop of 25-50 per cent, I don’t know. I’d be surprised if it eliminated trading profits entirely.”

Asked whether Sandy’s impact on the US would have negative implications for Bahamian insurance premiums via the reinsurance market, Mr Duff said latest industry forecasts were projecting a $5-$10 billion insured loss.

“That would be a significant loss for overseas reinsurers, and the reinsurance market, but at that level it will not eliminate their profits,” Mr Duff said.

He added that the reinsurance market had been trading well for nine months, and even id Sandy’s losses came in “at the top of that scale, it will not cause a revision of catastrophe rates. It may stiffen their resolve, and eliminate discounts”.

Bahamas First’s Mr Ward pointed out that the world insurance market was forced to share in the losses incurred by reinsurers from storms such as Katrina.

“I would say it’s going to have more of an impact than the local situation,” Mr Ward said of Sandy hitting the US. Insurance premiums would rise “on a gradual basis” if the storm proved extremely damaging.