Bahamians were yesterday warned that increased catastrophe insurance rates “may come into play in 2018” as a result of hurricane-related devastation in the US.
Patrick Ward, Bahamas First’s president and chief executive, told Tribune Business that businesses and homeowners needed to “be aware” of the potential implications for this nation even though it was largely spared by Hurricane Irma.
While Mr Ward said it was too early to determine whether Bahamian property and casualty rates will increase, and by what percentage, insurance risk modelling firms were yesterday pegging the combined insured losses from Irma and Hurricane Harvey at between $50-$75 billion.
The Bahamian insurance industry is likely to receive minimal claims from Irma, especially compared to the estimated $400 million-plus in Hurricane Matthew insured losses, but Mr Ward said is “not celebrating” that outcome.
He added that the storm impacted many on the sparsely-populated Family Islands “in a very real way”, while potential claims from Grand Bahama and Bimini may not have been submitted yet.
Other Bahamian insurers had forecast that Irma-related damage in Florida could increase Bahamian catastrophe insurance premiums by 20-25 per cent, due to loss of reinsurance capacity, but Mr Ward was more cautious yesterday.
“I think that, in isolation, both of the storms may not be of themselves sufficient to raise rates from the reinsurance market as a whole,” he said.
“But there is a possibility that the combined impact of Irma and Harvey may culminate in a loss that is sufficiently large to put a hole in the market.”
Assessing the potential impact for Bahamian businesses and homeowners, Mr Ward added: “Rates are not likely to be reduced at the same rate as in the past, and it’s possible - if the losses are large enough on a combined basis - that there may be some increases coming into play in 2018.
“It’s still a bit premature to say definitively, but the buying public needs to be aware that rates in the Bahamas for catastrophe-related business could be impacted, primarily by Irma and Harvey and the damage in the US.”
Mr Ward said Bahamian property and casualty underwriters would better understand any impact, and “what the percentage increase may be, if there’s any increase at all, in the couple of weeks” once the extent of US insured losses becomes clearer.
Bronek Masojada, chief executive of Hiscox, a Lloyds of London insurer, yesterday told The Guardian newspaper in London that AIR Worldwide, a risk modelling firm, was projecting combined Harvey and Irma insured losses at $50-$70 billion. Another firm, RMS, set its maximum at $75 billion.
Anton Saunders, RoyalStar Assurance’s managing director, last week told Tribune Business that property and casualty premiums in this nation could increase by as much as 20-25 per cent depending on the severity of Irma-related damage in Florida.
He explained that the knock-on impact for the Bahamas would come from sharing the same reinsurers as those that cover Florida. Bahamian underwriters buy huge quantities of reinsurance to enable them to cover risks in this nation, meaning that property and casualty premiums in this nation are dictated by reinsurers.
Mr Ward yesterday confirmed the reinsurance link, and said the 2017 hurricane season would “influence how we approach the renewal of our reinsurance programmes in 2018”.
Most Bahamian underwriters renew for January 1 each year, and he added: “Most companies will be making judgments as to what the prices might be, as well as their cost basis for 2018.
“We have sufficient time to make proper evaluations, provided the data comes out in a reasonable period of time.”
Mr Ward, meanwhile, said Bahamian insurers were unlikely to see many claims from Irma because the storm had largely spared the major population centres of New Providence, Freeport and Abaco.
“We have received a few claims, but it’s very small compared to what happened in Matthew,” he added, suggesting they numbered in the ‘two digits’ at this stage.
Mr Ward acknowledged that the number, and value of claims, could rise in Bimini and Grand Bahama, which were impacted by flooding and tornadoes from Irma. Among the properties impacted in Grand Bahama were those belonging to Colina Insurance Company and Star General Insurance.
Claims expectations are relatively low because the islands most impacted by Irma are sparsely populated, with minimal insurance penetration.
Yet Mr Ward added: “We’ve very mindful that these kinds of events impact people in a very real way beyond insurance contracts.
“We’re not celebrating. The impact is felt in a very real way by a number of people that are part of the Family Islands.”