‘ALL HOMES MUST HAVE INSURANCE’: Leading insurer warns mandatory cover has to be on agenda after Dorian

The destruction caused by Hurricane Dorian is seen from the air, in Marsh Harbour, Abaco in September last year. Bahamas First chief executive Patrick Ward said laws making it mandatory for all business and residential property owners to have full catastrophic insurance cover "must be on the table for discussion".
(AP Photo/Gonzalo Gaudenzi)

The destruction caused by Hurricane Dorian is seen from the air, in Marsh Harbour, Abaco in September last year. Bahamas First chief executive Patrick Ward said laws making it mandatory for all business and residential property owners to have full catastrophic insurance cover "must be on the table for discussion". (AP Photo/Gonzalo Gaudenzi)


Tribune Business Editor


Bahamas First's chief executive yesterday said laws making it mandatory for all business and residential property owners to have full catastrophic insurance cover "must be on the table for discussion".

Patrick Ward told Tribune Business he would personally seek to ensure it was on the industry's agenda after the International Monetary Fund (IMF) called for The Bahamas to develop "new approaches" to increasing insurance penetration and prevent the "dire straits" suffered by any homeowners post-Hurricane Dorian.

The Fund, in a statement on its team's visit to The Bahamas last week, said yesterday: "The financial sector appears to have weathered the hurricane well, with limited exposures to uninsured assets. Adequate reinsurance of domestic insurance companies abroad cushioned the impact of the hurricane on the domestic insurance sector.

"However, insurance penetration, in particular in the residential segment, remains low, leaving many homeowners in dire straits. New approaches to extend insurance coverage as part of a broader disaster risk management strategy would increase resilience."

K Peter Turnquest, deputy prime minister, last night told Tribune Business via messaged replies that the Ministry of Finance has "some initiatives" for increasing catastrophic coverage among Bahamian homeowners and businesses that it will soon discuss with the insurance industry.

"The Government recognises the national exposure to climate risk posed by significant exposed and under-insured private sector risk," Mr Turnquest said. "The Ministry of Finance is investigating options to incentivise more insurance uptake in the private sector, and has some initiatives that it will discuss with the insurance sector once finalised." He provided no details.

However, Mr Ward yesterday argued that The Bahamas needed to explore making it a legal requirement for all property owners - business or residential - to have full catastrophe coverage in much the same way that the Road Traffic Act stipulates that all motorists have adequate insurance for their vehicles.

Emphasising that he was voicing a personal view yet to be discussed with the wider Bahamian insurance industry, the Bahamas First chief said Dorian had exposed that just 40-50 percent of properties in the two devastated islands had proper insurance.

This, he added, meant that Bahamian taxpayers were being burdened with greater recovery costs - especially related to private home and business repairs - than they would otherwise have been had the owners "done the responsible thing" and properly insured.

Suggesting that a repeat of this situation would be unsustainable for an already cash-strapped government, Mr Ward said the level of non-insurance and under-insurance uncovered post-Dorian would likely have been even higher but for the presence of Abaco's large second homeowner community.

Noting that these investors were more inclined to insure, he added that legally mandating - and enforcing - the requirement for all property owners to purchase insurance could help reduce premium rates as more properties would "participate in the risk pool".

"That's one of the ideas that has to be on the table for discussion," Mr Ward told Tribune Business of such a proposal. "I'm not being dogmatic in saying it has to be, but it definitely has to be one of the ideas on the table for discussion. I don't know if it will be an industry initiative, but to the extent I can influence the position I would like to see that on the table for discussion.

"We have a precedent for it in place. Everyone driving a motor vehicle has to have insurance by law. There's an acceptance that it's in the public's interest as well as the individual driver's to have insurance in place as it protects the driver of the vehicle as well as innocent third parties. And if everybody has to buy it, it results in a lower cost per person.

"If you have more people buying insurance, it reduces the cost for every taxpayer and results in lower premiums as you have more persons participating in the pool."

Mr Ward said other countries had also made it a legal mandate for property owners to have insurance coverage against natural disasters, pointing to the case of Chile in dealing with earthquakes.

Suggesting that The Bahamas now faced similar risks from ever-stronger and more frequent hurricanes, he added that Chile's move had spread insurance costs over a wider population base while reducing the disaster recovery burden on government.

The Bahamas currently has no all-encompassing legal requirement that property owners must have catastrophe coverage. Banks and other lenders, though, require such insurance to be in place for commercial and residential properties on which mortgages are secured, and will pay the premium themselves if the borrower fails to do so, adding it to the latter's repayment costs with interest.

However, John Rolle, the Central Bank's governor, affirmed earlier this week that just 10 percent of the commercial banking industry's loan exposure is to Grand Bahama and Abaco. This meant that, in most cases, there was no lender pressure to properly insure.

While some may see Mr Ward's call as self-serving in terms of selling more insurance policies, there is little doubt that Dorian's $3.4bn worth of losses and economic damages is a game changer for how The Bahamas and its resident population tackles risk and climate change resiliency.

"There's no question that this is a conversation that needs to take place," the Bahamas First chief told Tribune Business. "It is to take away the cost of recovery from the public sector into the private sector, and to put in plans where people are able to buy insurance.

"I think the estimate is that probably between 40-50 percent of properties, anywhere from four to five out of 10, commercial and residential, were uninsured or underinsured to some extent. It is a bit skewed to the higher end because of the significant number of Abaco second homeowners that tend to buy insurance. If you took that segment out of it, the penetration rate would be even lower.

"That's the issue we need to address," Mr Ward added. "In some cases the problem is affordability, and in some cases persons have chosen not to insure and then rely on the Government for assistance. They're passing the cost on to other taxpayers as opposed to doing the responsible thing and buying insurance when there's a need for it."

While reform ideas are still being "thrown around" informally, he predicted that discussions will intensify in a month's time as the insurance industry gets its final Dorian claims out the way and the Government makes further progress on recovery and restoration efforts.

Tom Duff, Insurance Company of The Bahamas (ICB) general manager, told Tribune Business that the low penetration rates exposed by Dorian were on "the consciousness of the industry" but developing a solution would not be easy.

Revealing that the topic had recently been discussed at a meeting between the insurance industry and Inter-American Development Bank (IDB), Mr Duff said: "I don't think there's anything specific but it's something the Bahamas Insurance Association (BIA) has on its list.

"We'd all like to see greater penetration, but the mechanism of how to achieve that, and the products that would be needed, I can't give you a hard and fast plan. It's something there in the consciousness of the industry.

"We obviously saw the low insurance penetration rate following Dorian, which is unsustainable, and would like to see higher penetration levels, but coming up with a product to give individuals a higher level of coverage needs greater discussion with the industry and the Government, as they may have to be part of the discussion at this point. We're in the infancy of the discussions at this point."

Mr Duff added that Bahamian insurers were "looking at all the different options" for solving low insurance penetration rates, but said any new product or solution would need to be approved by the reinsurers that underwrite the majority of the collective multi-billion dollar risk in this nation.

The ICB chief said Dorian had produced evidence of "substantial non-insurance and very significant under-insurance", and added: "The adjusters' reports coming in provided plenty of evidence of customers being under-insured. That's something that happens with every hurricane event, and is closely linked to the state of the economy."


ohdrap4 3 years, 8 months ago

Insurance companies should be mandatorily non profit. That way premiums would be low.


Porcupine 3 years, 8 months ago

Bahamians in The Bahamas are finished. This is now a country owned and run by those who produce little but expect a lot in return. As the cost of living continues to rise astronomically, as the cost of property and all related expenses continues to go through the roof, there is no way the majority of Bahamians will be able to "make it". The politicians are NOT working for "The People". They are working for a few people, mostly those in the FIRE sector. Finance, Insurance, and Real Estate. When the claim that because people are required to have liability insurance on their cars, therefore should be required to have insurance on their homes, is allowed to stand without realizing the stupidity of this statement, they obviously are lacking in any reason, or believe that Bahamians are just plain stupid. When I tell thinking people outside this country what our national conversations are of late, they merely laugh. It truly seems we are a nation of selfish children. This seems to be the best way to describe our national dialog and status.


Tarzan 3 years, 8 months ago

This suggestion may be the dumbest in a long line of dumb ideas resulting from the Dorian disaster. This catastrophic event or "hurricane" coverage is all passed on to reinsurance risk and priced by the reinsurance market, and the "pool" is not limited to one country or one island in one country. More Bahamians buying this coverage will not move the premium cost needle one whit. The cost of this coverage is ludicrous, and the deductible provisions are such that short of total devastation, which is a once in 200 year event on some islands, not even that on all, the insured suffering substantial damage, recovers zero. Cost is prohibitive and making it mandatory would bankrupt the populace. This is nothing but a crass effort to put lots of cash in a few local insurance brokers' pockets.


professionalbahamian 3 years, 8 months ago

Wow - Government please stay out of the private sector and stop making socialist decisions ... wouldn't health insurance and the cost of food be equally as important and yet he Government still charges VAT on those without effective pricing oversight - few can afford private health insurance - gov has to have their hand in every "income stream" lol so they can spend/ borrow whatever comes to their mind.


sweptaway 3 years, 8 months ago

They even tax your savings and checking monthly !


Hoda 3 years, 8 months ago

Well insurance coverage is a contract, you dont have to accept their terms as given. If they screwed you over then you question, pry and try and negotiate something else, you dont just keep signing the same contract every year. When they send their adjustors to your house, you make sure they fully detail all the damages, if they hop on the roof you supposed to be on it too, detailing everything. Further, if yoy think they trying to undercut you, you sue their ass, and report them to the insurance commission. Yeah, their are inequities in the insurance business but to be honest it is also fundamentally socialist for people expect the govt to rebuild their homes in full - and not pay any taxes. Nonetheless, i dont think ppl she be made to purchase insurance.


Greentea 3 years, 8 months ago

None of that matters in the Bahamas. Insurance companies here are greedy and unethical. I have never seen a dumber group of employees in my life. This suggestion tops it all. Almost unbelievable - except this is the Bahamas.


bahamianson 3 years, 8 months ago

This is a shock. Ok, I am just speechless at the moment . Just a simple question, where is the money going to come from?


joeblow 3 years, 8 months ago

If I qualify, I have a right as a private citizen in a democracy NOT to purchase home owners insurance or any other kind of insurance for that matter. I can choose to take that risk but, I should also not expect the government to come to my aid if the home is destroyed by accident or natural disaster!!


DWW 3 years, 8 months ago

well when the adjusters are using inaccurate construction costs then of course everyone is going to be under-insured. Such a racket. It should be the insurance companies responsibility to ensure the homeowner has adequate coverage. not the other way around. is that really fair business? does this open up a dialogue on consumer protections from predatory insurance companies? How about insurance companies denying coverage on wood homes when the wood homes held up better in many instances than the concrete ones. Until you have a mechanism to cover the cost of insurance for the indignant, the under-privileged, destitute or just retired without income persons then mandatory coverage is unethical at best.

With the extortionate cost of living in the Bahamas it is not unexpected that the majority of people can't afford insurance...

The Bahamas Government and Central Bank should consider whether forcing persons to sign the Conditions of Average Clause as unconstitutional. If the insurance agent or broker is too lazy to ensure that their client has adequate coverage then something is wrong with the industry.


OMG 3 years, 8 months ago

With a well constructed house the roof is the most likely part to fail. Giiven the extortionate premiums that are charged one person I know has the philosophy that if you are able to save what you would pay for annual premiums and put it in a savings account then with bit of luck you could do repaors out of that nest egg. However do these highly paid executives have any idea how impossible it would be for the majority of the population to pay any premium.


bogart 3 years, 8 months ago

The types of roofs carry ditterent rates calculating the premiun ie 1 Bermuda tiled roof house has a very good rate 2. Asphalt roof most homes carry a more expensive rate. 3. Wooden shingled house carries the highest rate more prone to fire etc. Insurors also fine tune rates on distances from beach etc


The_Oracle 3 years, 8 months ago

How about the Government start regulating the insurance companies and industry first? Make sure their houses are in order before they impose themselves into every household in the country, concerned only with profit, not payout on policies. The mandatory "purchase" of any commodity runs counter to economic growth or even stability. Government administrations have put themselves into the position of being the Great provider of all needs, all have failed, with nothing to give except what has first been taken from you. They cannot build an outhouse for less than $500/sq ft.


John 3 years, 8 months ago

So they want to force you to purchase insurance you cannot afford. And who benefits? The question for discussion is how many businesses and homeowners f who were insured got favorable settlement from their insurance companies.


truetruebahamian 3 years, 8 months ago

What about the publicly owned buildings that fall victim to fire and causes borne by lack of maintenance. They seem to be uninsured - and the government holds these buildings in the public trust.


BoopaDoop 3 years, 8 months ago

The bank required comprehensive insurance on the rebuilding cost of the entire structure. This is what makes the premiums so high. A foundation is included in the rebuilding cost but will likely never need to be rebuilt.


Well_mudda_take_sic 3 years, 8 months ago

Patrick Ward wants the more greedy insurance companies like Bahamas First to have the right to put their hand into your wallet or purse and take whatever amount they want.

Right thinking Bahamians with insurance coverage through Bahamas First should move their insurance coverage to another insurance company. I did a long time ago and have been enjoying lower insurance costs and higher insurance claim proceeds ever since.

Even your banker cannot prevent you from changing to a much less greedy insurer as long as your new insurer is a reputable insurance company.

And think about changing your bank too if your bank insists on you keeping your insurance business with a greedy insurer like Bahamas First that pays your bank a kick-back commission for the privilege of charging you higher insurance premiums and paying out lower proceeds on your insurance claims.


bogart 3 years, 8 months ago

BEST EXCELLENT PLAN !!!!! Mr. Ward deserves to be appointed to the Senate and be nominated for leadership of any Political party. Some of his platform would be 1.One in 8 Bahamians do not know where the next meal coming from ...so let them eat from home. 2. Increasing vagrants at Potters Cay area needs to return to their Homes in Gated Communities 3. People needs to ditch the Corn Beef and eat more Fillet Mignon 4. People must improve diets by buying more $14 dollar bottle of orange juice eat more organic foods5. Ban the small low cost cars breaking down and buy more durable sturdy cars like Mercedes and European cars 6. Ban the govt schools and send them to private schools.......Really, this is the type of political caliber jonsering for selection to any Constituency.

Looking at the accompanying photo of the Marsh Harbour Shantytowns, Insurance Executive and leading insurance must know that the Shantytowns are Illegal, they have no title papers, the structures are not constructed proprely no risers certified, there is no Approved Subdivision plans by govt...no legal passageways, setbacks...A known deathtrap that grew remained until everyone knew would happen. So let insurance executive get insurance for Shantytowns..!!!!


jackbnimble 3 years, 8 months ago

We would happily comply if Mr Ward can telll is how many claims Bahamas First has honoured since Hurricane Dorian. His company is known to frustrate claims and are all about collecting and not paying out. So he gets a mass increase in premiums and then takes the rate up or worse yet not honour the claims. Everyone knows that insurance is the biggest rip off beginning with NIB Health Life - all take and no give


TalRussell 3 years, 8 months ago

The story's headline should've prompts Tribune's readers to silently ponder - from what universe did such comrade originate from and have such tin-foiled of a wingnut idea - to have rose through ranks be's the face of the insurers First's chief executive? Can't write this, just. cant.


The_Oracle 3 years, 8 months ago

Government has created this societal flaw of people not putting anything away, no savings, no contingency fund, no insurance, no plan. They constrict the economy, yet promise to be the great provider. As Long as the Government "taxes" someone else, we line up for the handouts, but now they're running out of others to tax. So tax us they will, all while holding out to be the best thing for us since sliced bread. Relief comes in a flood from compassionate people, from all over the world. Charity. No amount of legislated stupidity can ensure success or get anything done without enforcement, but can destroy what does work. Government will never succeed at Charity.


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