In­sur­ers breathe sigh of re­lief

Jamaica Gleaner - - ENTERTAINMENT - Steven.jack­son@glean­

IN­SUR­ANCE EX­PERT Peter Levy agreed on Tues­day that the veer­ing away of Hur­ri­cane Matthew re­sulted in Ja­maica miss­ing the equiv­a­lent of a bomb.

He ex­pects few gen­eral in­sur­ance claims, based on early indi­ca­tions. But the dam­age from wa­ter ac­cu­mu­la­tion re­mains to be seen, said Levy, man­ag­ing di­rec­tor of BCIC and vi­cepres­i­dent of the In­sur­ance As­so­ci­a­tion of Ja­maica.

BCIC is one of 10 reg­is­tered com­pa­nies which of­fer gen­eral in­sur­ance for in­di­vid­u­als and busi­nesses. Nine of the 10 are oper­a­tional, ac­cord­ing to gov­ern­ment data.

Levy ex­plained that a di­rect hit from Matthew would have re­sulted in an al­ready bad year for prop­erty in­sur­ance be­com­ing far worse.

“Prop­erty in­sur­ance is hav­ing its worst year in re­cent times. We ex­pe­ri­enced the loss from the Wisynco fire, and be­fore that the loss at the ho­tel un­der con­struc­tion in Ne­gril. Then the flood­ing by Mar­cus Gar­vey Drive in Septem­ber – there was a lot of dam­age to cof­fee and sugar, among other items,” he said.

“So a hit or near-miss from a se­ri­ous storm might have an im­pact in the way that rein­sur­ers view the level of risk in Ja­maica,” he added, in­di­cat­ing that higher risk usu­ally re­sults in a higher cost to in­sure port­fo­lios for the lo­cal in­sur­ance sec­tor and, there­fore, higher pre­mi­ums to consumers.

Levy said Haiti’s di­rect hit would not im­pact the re­gion in a ma­jor way – at least, not ini­tially. That’s due to fewer claims aris­ing from large nat­u­ral dis­as­ters in the re­gion in re­cent years. It has re­sulted in a build-up of cap­i­tal for rein­sur­ers, many of whom are based in ma­jor me­trop­o­lises in coun­tries such as Switzer­land, Ger­many, and the United King­dom. The re­sult is that the cost of rein­sur­ance re­mains rel­a­tively at­trac­tive to lo­cal in­sur­ance com­pa­nies. “How­ever, that could change if Mi­ami or New York or another ma­jor US city is hit by a catas­tro­phe and claims are large,” said Levy, adding that the storm path for Matthew is ex­pected to

A baux­ite pier in St Ann. Statin re­ports that the min­ing sec­tor un­der­per­formed in the June quar­ter due to de­creased ac­tiv­ity at No­randa. avoid Mi­ami’s lux­ury water­front prop­erty and make land­fall in less in­sur­ance­sen­si­tive ar­eas.

“The rein­sur­ance mar­ket is kind of like a big body of wa­ter and if some­thing hap­pens a few miles away, it af­fects ev­ery­one. Any fall­out caused by Matthew will af­fect Haiti first,” he said.

The lat­est reg­u­la­tory data on gen­eral in­sur­ance, pub­lished by the Fi­nan­cial Ser­vices Com­mis­sion, shows that over three months to March 2016, the in­dus­try earned $4 billion in net pre­mi­ums and $700 mil­lion in net in­come. Over 12 months end­ing De­cem­ber 2015, the gen­eral in­sur­ance in­dus­try earned net in­come $3 billion on net pre­mi­ums of $16.3 billion. This equated to $100 mil­lion more net in­come year on year.


Hur­ri­cane Sandy, which hit Ja­maica in 2012 caused dam­age re­port­edly at US$55.96 mil­lion. The eastern sec­tions of the is­land, in­clud­ing St Thomas, Port­land, St Mary and St Cather­ine, felt the brunt of the storm forces.

The IAJ in­di­cates that Hur­ri­cane Ivan in 2004 cost the sec­tor $5.9 billion re­lated to some 7,512 claims. Hur­ri­cane Dean cost the sec­tor $2.1 billion from 3,344 claims.

Claims are usu­ally low on prop­erty in­sur­ance when there is no hur­ri­cane. Last year, for ex­am­ple, there were 526 claims for $442.8 mil­lion, the IAJ said.

In 2004, the dev­as­ta­tion aris­ing from Hur­ri­cane Ivan reignited the dan­gers of hur­ri­canes to a new gen­er­a­tion fol­low­ing the 1988 pas­sage of Gil­bert and the 1951 pas­sage of Char­lie. De­spite those fears, a large por­tion of the pop­u­la­tion re­mains out­side the in­sur­ance net.

The Ja­maican Gov­ern­ment, on the other hand, has sought some form of in­sur­ance bal­ance and is now cov­ered un­der a re­gional scheme.


The idea for the Caribbean Catas­tro­phe Risk In­sur­ance Fa­cil­ity (CCRIF) arose out of Hur­ri­cane Ivan, which caused more than US$6 billion in dam­age across the Caribbean. In both Gre­nada and the Cayman Is­lands, losses were close to 200 per cent of the na­tional an­nual gross do­mes­tic prod­uct and a fur­ther seven coun­tries were also se­verely im­pacted, ac­cord­ing to the CCRIF in its Strate­gic Plan 2015-2018.

CCRIF al­lows mem­ber gov­ern­ments ac­cess to short­term liq­uid­ity fol­low­ing a ma­jor hur­ri­cane or earth­quake. The fa­cil­ity, founded in 2007, pro­vides par­tic­i­pat­ing gov­ern­ments with cov­er­age tai­lored to their needs at a sig­nif­i­cantly lower cost than if they were to pur­chase it in­di­vid­u­ally on the mar­ket.

Since in­cep­tion, CCRIF has made 12 pay­ments to pol­i­cy­hold­ers to­tal­ing more than US$35 mil­lion.

Peter Levy, man­ag­ing di­rec­tor of gen­eral in­surer BCIC and vi­cepres­i­dent of the In­sur­ance As­so­ci­a­tion of Ja­maica.

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