Bahamas News

Despite the Atlantic Hurricane Season having already started, insurance brokers are continuing to urge locals to ensure that their hurricane policies are updated.

The reminder came as the Minister of Finance disclosed that The Bahamas is now able to access US $25 million from the Caribbean Catastrophic Risk Insurance Fund [CCRIF]. The government has allocated a $1.2 million contribution to the fund in the 2007/2008 fiscal budget.

President of the Bahamas General Insurance Association Robert Hardy endorsed the effort.

“This is a pool for the governments in the Caribbean to draw from for repairing docks, bridges and roads,” Mr. Hardy said.

“It would repair things that they own that were damaged by hurricane. It would not affect general insurance but it would be good for the country.”

Access to the fund places the Government of The Bahamas in the position to have immediate access to liquidity in the event that a natural disaster strikes like a hurricane. For homeowners, securing adequate insurance protection, is a key protective measure.

Operations Manager at Sunshine Insurance Brain Moodie said the home should be the first priority.

“You need any property insurance because you want to protect your assets,” Mr. Moodie said. “Your home is the most valuable asset you have and you want to protect it, not only from hurricanes, but from any type of damage.”

Mr. Moodie explained insurance rates are not determined by individual companies, but by larger reinsurance companies. He added that because hurricane seasons become more eventful, the rates are not likely to decline anytime soon.

“[Reinsurance] companies have sustained a lot of loss over the past three years and they have increased their rates accordingly,” Mr. Moodie said. “From a catastrophe point of view, local insurance companies don’t have a lot of flexibility when it comes to premium rates.

“Although we have seen a stabilization of hurricane rates from last year to this year, unless there is another quiet hurricane season, rates will not decrease.”

According to Mr. Moodie, currently the general rates for hurricane insurance is between 1.4 and 1.5 percent of the home’s value.

Mr. Moodie said rates of hurricane insurance premiums are also determined by the cost of rebuilding the home.

Gayle Farquaharson of Royal Star Insurance explained the mechanics of a typical hurricane insurance policy.

“Most of our policies are written on what we would call a full-cover basis or including catastrophe cover basis, meaning that there is a list of perils that include hurricane coverage,” she said. “What we mean is that it is catastrophe coverage in the event of a loss.”

The advice is for persons to have their homes appraised every few years by a licensed appraiser because building prices are increasing.

There have been cases where some people may have their homes insured for $200,000 when, in fact, they may be worth a whole lot more than that.

Mr. Moodie added that the rates for coastal homes are significantly higher than any other home.

“If your property is closer to shore or in an area that is prone to flooding or high winds, the rate what you pay on the property will be higher than someone living in a more sheltered area,” he said.

He said the construction of the home is also important in determining rates for hurricane coverage.

“There are some homes that are wooden and there are some homes that have tiles for roofing,” he said. “Underwriters would look differently on those homes because tile roofing would be resistant to fires but not necessarily hurricanes. It depends on the underwriters and what they think is a risk.”

Insurance brokers acknowledged that the Caribbean is more susceptible to hurricane losses.

The World Bank which helped CARICOM to set up the US $110 million CCRIF noted that countries in this region are highly exposed to adverse natural events which can result in disasters affecting their entire economic, human and physical environment.

By Kendea Dames
The Bahama Journal