The Tribune

By YOURI KEMP

Dorian-related insurance losses are “heavily skewed” towards Abaco with one resort development potentially accounting for $800m to $1bn worth of claims by itself.

Charles Johnson, a Bahamas Insurance Association (BIA) council member, told the annual Accountants’ week conference that 86 percent of the industry’s losses are in Abaco with the Baker’s Bay Golf & Ocean Resort on Great Guana Cay potentially accounting for up to 50 percent of all damages.

With the more sparsely-populated eastern Grand Bahama taking the brunt of Dorian, as opposed to Freeport and West End, he added that the island was set to account for just 12 percent of claims.

Yet Mr Johnson warned that the financial recovery picture was even bleaker than that allowed by K Peter Turnquest, deputy prime minister, who earlier this week estimated that 80 percent of losses incurred by private homeowners and businesses were uninsured.

The BIA council member added that of the 20 percent who had insurance cover, some 75 percent were likely under-insured or lacked proper coverage such as business interruption insurance. As a result, some 95 percent of Dorian victims may lack either the correct insurance or any insurance at all.

“The remaining 20 percent of the persons that are insured, some 75 percent of that number is under-insured,” Mr Johnson confirmed. “The BIA estimates that there is a $1.5bn to $2bn financial impact as a result of Hurricane Dorian, which is the single largest pay-out event in The Bahamas. The BIA has already accounted for $1bn of that estimated amount in payments already, with most of these claims to be settled before the end of the year.”

He encouraged accountants to push for “business interruption insurance” for their clients considering the magnitude of what has happened and the sheer amount of losses accumulating.

“Eighty-six percent of the losses are in Abaco, and 12 percent are in Grand Bahama,” Mr Johnson said. He added that the numbers are “heavily skewed” towards Abaco because of the sheer amount of damage and expected claims volume that would happen as a result of Baker’s Bay being impacted.

“There is over $800m, and upwards to $1bn, in estimated insurance value as a result of the value of the buildings on Baker’s Bay,” he added. Turning to the collective impact, the insurance executive said: “One percent of the damages are in motor vehicles and another one percent is in marine losses. Sixty-two percent of the damages are homes and 37 percent are in commercial properties.”

Mr Johnson said that “without question” deductibles for catastrophic insurance will increase from 2 percent to 3 percent, but he urging homeowners and businesses to in future “insure for the replacement value”. He added that Bahamians should also expect a “30 percent rate increase from reinsurers”, as the industry tries to avoid high-risk areas and reduce losses.

“What may happen is smaller companies may decide to leave the market as a result of all of the pressure being placed on them as a result of Dorian,” Mr Johnson said. He added that this may create an opportunity similar to what happened after Hurricane Andrew in 1992, when several American companies left the market, leading to the emergence of local insurers such as Bahamas First.

“The BIA encourages a review of the building codes in The Bahamas along with the use of stilts in low lying areas,” Mr Johnson said. “In addition, we are strongly encouraging persons to insure their property at the ‘replacement value’ and to continually ‘re-value’ their homes to ensure that they are covered for the right amount in the event that something like Dorian happens again.”