Insurers: Bahamas ‘dodges bullet’ on Hurricane Nicole


Tribune Business Editor


Bahamian insurers yesterday asserted that the nation has “dodged a bullet” with Hurricane Nicole amid expectations that it will produce “minimal” losses and damage.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business the storm - which only grew to a Category One hurricane when it reached Grand Bahama - had delivered a much weaker blow than property and casualty underwriters had initially expected.

As a result, claims payouts will be less than the industry had originally braced for, although he declined to reveal both initial estimates and projections for what the actual numbers might be. The RoyalStar chief added that the Nicole outcome “doesn’t hurt”, especially given that Bahamian insurers are already locked in difficult negotiations for reinsurance treaty renewals.

The availability and cost of reinsurance is a growing concern, due to several companies exiting the Caribbean catastrophe coverage market in recent years as a result of multi-billion dollar losses on past storms. Timothy Ingraham, Summit Insurance Company’s managing director, yesterday agreed that the industry could “breathe easy” now that Nicole has passed since major damages and claims payouts would only have “further complicated” reinsurance talks.

Both he and Mr Saunders said they would have a better idea on the likely losses and damage inflicted by Nicole, and the level and amount of claims payouts, by today once clients had assessed their insured assets and loss adjusters had reached the Abaco cays to conduct assessments.

“People are just getting back to work and doing assessments on their various properties,” Mr Saunders explained. “It’s not as bad as we thought it would have been for sure. It is below what we thought we were going to get. There was storm surge, but it didn’t go as far as we thought it would go. It’s funny how these things end up impacting the land and how the surge goes.

“It was not a wind event. Whatever damage was done came from flood or sea surge. The flooding was largely caused by sea surge. The rain was not that great of an impact, but high tide and surge would have been an issue.” Asked whether the two islands struck directly by the storm, Grand Bahama and Abaco, fared differently, Mr Saunders replied: “Both are going to end up the same with minimal damage even though Grand Bahama had the stronger winds.

“From a wind perspective, a Category One is not going to do any damage to our buildings that are properly constructed and follow the regulations. We dodged a bullet. It could have been worse, but there is going to be minimal impact. I think everyone’s probably going to be saying the same thing, minimal impact.”

He was backed by Summit’s Mr Ingraham, who said: “I don’t have any information presently as to where we’re headed with the losses and I’d prefer not to guess. Obviously this one was nothing like, and nowhere near, Hurricane Dorian so we can breathe easy from that perspective. This one was nothing like Dorian from a wind and rain perspective.

“We did have strong tropical storm force winds but it’s not expected that will do a huge amount of damage. Our building codes require that properties withstand winds up to 120 miles per hour, 140 miles per hour. Given that, we are not expecting too much damage. That’s the hope; that it’s a minimal one.”

For the Bahamian insurance industry, the main issue now is the level of damage and insured losses in Florida, which Nicole completely crossed from its east to west coast, further exacerbating the multi-billion dollar impact inflicted by Hurricane Ian earlier this year.

Reinsurers tend to treat The Bahamas and Florida markets as one, meaning that huge hurricane-related damage and losses in the latter often leads to an increase in premium rates for Bahamian homeowners and businesses as they try to recover payouts. Bahamian property and casualty underwriters must acquire huge amounts of reinsurance annually because their relatively thin capital bases mean they cannot cover the multi-billion dollar assets at risk in this nation.

The global reinsurance market has been recently been pulling back from the Caribbean due to hurricane-related losses, meaning that already-expensive insurance coverage, especially that which protects properties and other assets against hurricanes, would only increase further due to the cutback in supply. In turn, this would push premium prices beyond the reach of more Bahamians, making insurance increasingly unaffordable in a climate where the threat posed by Dorian-style storms is growing.

 “Right now, for us, [reinsurance] capacity is more important because we have to get capacity to be able to offer a product,” Mr Saunders told this newspaper. “Right now, our concern is more on getting capacity and then negotiating a price. If we don’t have the capacity, we don’t have anything to offer anyone. It is a challenge, and we are going through the process and will see how it pans out.”

Mr Ingraham agreed, saying: “We’re already in a difficult reinsurance market and anything significant [from Nicole] would make a bad situation worse. We’re hoping that it comes in as a fairly small storm. You don’t expect storms this late in the season, and it just exacerbates an already-difficult situation. 

“It’s in everyone’s best interests to have an event that’s not overly dramatic in terms of losses. Most of the local companies renew their reinsurance treaties on January 1, so we’re in the middle of the renewal season. More losses is definitely not what anyone wants at this point.”


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