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Insurers Suffer 'Over $1bn' Dorian Losses

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hurricane Dorian has to-date inflicted “over $1bn in insured losses” on Bahamian insurers, it was revealed yesterday, with some forecasts suggesting this may rise as high as $1.5bn.

Warren Rolle, the Bahamas Insurance Association’s (BIA) chairman, told Tribune Business that property and casualty losses stemming from the category five storm were already double the sector’s initial “conservative” $500m estimate - and that is with some carriers yet to report their figures.

He warned it was “a given” that insurance premium rates will increase next year due to the scale of Dorian’s devastation, with the global reinsurers who determine Bahamian prices likely to seek extra compensation for this year’s losses and the increased disaster risk that this nation and the wider Caribbean region present.

The BIA chief said that while Dorian-related claims volumes were smaller in comparison to those received following 2016’s Hurricane Matthew, the extent of the damage and losses was much higher this time given the former’s greater strength and storm surge

“I don’t have details from all insurers yet, but from those insurers that have already reported we’re looking at over $1bn in insured losses,” Mr Rolle disclosed to this newspaper. “We’re not seeing the volume of claims we saw in Matthew, but the severity is much more significant than we saw back then.

“This is the biggest catastrophe we’ve had in the history of the industry. We’ve not seen anything like this one, and I hope to God we don’t experience anything like this ever again for any number of reasons.”

Because not all property and casualty underwriters have reported their Dorian-connected claims to the BIA, Mr Rolle said it was possible the industry’s total insured loss could rise even higher even though most claims have likely been submitted.

“Matthew was approximately $400m, but I think it’s definitely going to be.... I know some estimates place it at $1.5bn,” he told Tribune Business. “We still have a few insurers yet to report. As it stands now we’re just over $1bn.

“Most of the losses have been reported to insurers. We don’t expect to see any major increase in the number of claims being reported at this stage, which is post-Dorian. We hope to resolve most of those claims, representing millions of dollars, by the end of the year.”

The BIA chairman said the industry had several billion dollars worth of insured property risks in Abaco alone, especially when “you add places like Baker’s Bay, where I understand insured values could be up to $800m alone”.

Patrick Ward, Bahamas First’s president and chief executive, told Tribune Business that the insurance industry was likely to “revise upwards” its original $500m-plus estimate for insured Dorian losses, which was given less than two weeks after the storm’s passage.

“They’ve certainly not gone down,” he said of the estimates. “If anything I think the industry will be looking at revising upwards. I think we’ve pretty much seen all the clients that have reported losses at this stage.”

Mr Rolle, meanwhile, reiterated that the extent of the devastation, especially in and around Marsh Harbour in central Abaco, had made it particularly challenging for the insurance industry’s loss adjusters to access the disaster-hit areas and start assessing damages/claims when compared to previous storms.

And, while warning Bahamian businesses, and home and auto owners, to brace for premium rate increases that are almost inevitable next year post-Dorian, the BIA chair voiced optimism that there will be no reduction in available insurance coverage.

“Insurers are now renegotiating contracts with reinsurers,” he told Tribune Business. “We anticipate there will definitely be rate increases. It’s too early to say what level the increases will get to, but that’s a given.

“We anticipate there will be a push to increase deductibles in the affected areas, but we will know more in the coming weeks as we meet with reinsurers. Those meetings are happening now.

Bahamian property and casualty insurers have no choice but to purchase vast quantities of reinsurance otherwise their relatively thinner capital bases will leave them unable to cover the multi-billion dollar risks present in this nation. As a result, reinsurers are the dominant player in determining the premium prices Bahamian consumers will pay.

Mr Rolle, though, suggested there was little to no danger that the availability of insurance coverage will shrink as a result of reinsurers exiting The Bahamas’ market and the wider Caribbean due to the heavy hurricane-related losses experienced in successive years.

“I think the industry will be fine,” he told Tribune Business. “Obviously some reinsurers may want to reduce their exposure in the Caribbean, but we don’t feel it will be an issue fulfilling reinsurance programmes as an industry.”

However, Tom Duff, Insurance Company of The Bahamas (ICB) general manager, said the industry “obviously has to be concerned” over 2020’s premium pricing and coverage availability in Dorian’s aftermath.

Agreeing that both ICB’s and the industry’s losses “will be multiples” of what they absorbed from Hurricane Matthew, Mr Duff added: “The next big challenge for the industry is to get a consensus from reinsurers as to what kind of rates and terms they’re going to be looking for to continue to support Bahamian insurance companies.

“We’re just starting the negotiations process now. There’s no question that we can’t expect reinsurers to suffer this scale of loss. This is the third year out of four in which they’ve suffered a significant loss in the region. Now Dorian. This is obviously something they’re looking closely at.

“We just have to brace ourselves as an industry and find out what kind of terms they need to continue support for the market. It’s always a concern when you’re presenting reinsurers with a major hurricane loss, and this is the third year out of four. We obviously have to be concerned.”

ICB is the carrier through which BISX-listed J. S. Johnson places much of its property and casualty business, and Mr Duff said the “original policy rates reinsurers will be most comfortable with” are key.

“In the next few weeks we will have a much better feel for what reinsurers are looking for on original policy rates,” he added. “We rely heavily on proportional reinsurance as well as catastrophe excess of loss.

“Proportional capacity is very important to insurers in giving us the ability to write business. Reinsurers are particularly interested in the rates we are charging because they’re taking a proportional share of the insurance premium.

“In a few weeks we will have a better feel for what reinsurers are looking for to provide returns for their shareholders and factor those into our original rates, coming up with rates and terms our customers consider remain value for money.”

Mr Duff said Dorian had distinguished itself from previous hurricanes by the “quite horrendous and more widespread” damage it had created, almost completely wiping out Abaco’s infrastructure as opposed to only damaging parts of it.

Comments

Chucky 2 months, 3 weeks ago

These are not losses, this is what it is to provide insurance, claim payouts occur when they provide the service they charge for.

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Porcupine 2 months, 3 weeks ago

Insurance companies are gambling houses. Nothing more. They produce no more than the web shops for our country. As was stated above, these are not losses. If the company does not go bankrupt, they are merely providing the services which we pay for. If they lose money, they bet wrong. Insurance is truly a drag on any legitimate economy. We have only managed to glorify and normalize them to make it seem as if those who work for insurance companies are contributing something of value for our community. Mostly because insurance agents are upstanding citizens and regular church goers. Yet, that doesn't change the nature of their work.

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Well_mudda_take_sic 2 months, 3 weeks ago

Only a true fool would believe anything Warren Rolle has to say.

The big picture on Dorian-related insurance claims is in fact a relatively simple one.

The true value of the insured damages is astronomical - far above any amount BIA is willing to admit. In fact, quite a few of even the big name local insurers have been completely wiped out, i.e. made technically bankrupt, by the true value of the insured damages within their book of business.

Rather than reinsuring a conservative portion of their insured risks with other financially stronger insurers abroad, and thereby effectively sharing a good portion of their premiums received with those other insurers, many of our now technically bankrupt local insurers greedily kept the lion's share of the insured risks and related premiums received for themselves. These bankrupt local insurers can only now survive by not honouring and paying out the true value of the damages they have insured. In other words, their very survival is dependent on ruthlessly aggressive claims denial tactics where those among the insured who are least able to hire high priced lawyers to defend the validity and true value of their insured claims lose out big time. Aggrieved policyholders should not expect any help from insurance regulators who are for all intents in purposes 'owned' by the insurance industry.

Banks and other lending financial institutions like life insurance companies are big losers too as mortgage loan holders to the extent they have also financed insurance premium payments on the mortgaged property of borrowers who are no longer able to honour their loan obligations as a result of the impact of Dorian on their mortgaged property and/or jobs.

You can bet the banks and other lending financial institutions are not going to be similarly inclined to finance property purchases and associated insurance premiums going forward when they see the pitifully low amounts paid out by the now technically bankrupt local insurers in relation to the true value of the claims that were actually insured. This will of course only further exacerbate the serious over-liquidity situation within our banking system at this time.

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observer2 2 months, 3 weeks ago

Very enlightening Well Muddo Take Sick!

I always felt it would take a Dorian II type event to collapse our inbred financial system. But without adequate reinsurance bank losses which will appear in about 6 months maybe higher due to insurance company failures.

RBC’s pull out from Fidelity, CIBC intention to pull out from First Caribbean etc removes the deep pocket Canadian backers. You would have to be blind not to see that rising sea level and stronger hurricanes caused by global warming make Bahamian real estate worthless by 2050.

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TalRussell 2 months, 3 weeks ago

Dealing with guesstimation numbers makes populaces to asks, what is it about the more import how much money in total have the comrade Insurers, actually paid out that they don'r want share with populaces. yes, no ...

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DWW 2 months, 2 weeks ago

It is blatantly criminal when the insurance company takes 2 months to get to your house to assess the damages and then tells you that they won't cover everything because the homeowner 'didn't secure the home from further damage'. whose at fault for the extreme delay in getting the assessments done, surely you can't put the onus on the policy owner?

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observer2 2 months, 2 weeks ago

DWW, also I know of an incident where a house is a complete write off but the insurance company will not make any payout, even partial, because some of the structure still “stands”. The engineer argued that the residual structure is unsound.

Meanwhile the owner and her family is suffering further trauma and anxiety at the hands of the insurance company two full months after the hurricane. Without a job and without a house they were looking to the insurance money to restart their lives.

Meanwhile the regular is nowhere to be scene.

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