Puerto Ricans in insurance tumult
Flood of claims after Maria has firms struggling
DORADO, Puerto Rico — Thousands of Puerto Ricans have been forced to drain their savings, close their businesses, or resign themselves to living with structural damage as they fight insurance companies over millions of dollars’ worth of claims that have gone unanswered or unpaid more than a year after Hurricane Maria.
Experts say the Category 4 storm caught insurance companies off-guard and left them reeling financially after they were hit with nearly 279,000 claims, a number that one expert called “extraordinary.” One major insurer has already folded, leaving more than 1,500 claims worth a total of $70 million up in the air. Many worry that other companies will follow.
“The industry has never faced such an astronomical number of claims,” said Iraelia Pernas, executive director of Puerto Rico’s Association of Insurance Cos.
The Office of the Insurance Commissioner of Puerto Rico has already issued fines totaling more than $2.4 million against at least seven companies for delays in resolution and payment of claims. All companies in the U.S. territory had bought reinsurance, but it was insufficient for some.
Commissioner Javier Rivera said it’s too early to say what will happen with Real Legacy, the company that folded. But he believes the other company that exceeded its reinsurance limits, Triple-S, has enough capital to avoid a similar fate.
“There will definitely always be a risk that some claims might not be addressed,” he said. “But we will do everything that is possible.”
Two insurance companies in Puerto Rico are also under review with negative implications, said Brian O’Larte, director of the property and casualty ratings division for A.M. Best, an insurance rating firm.
Hurricane Maria was the strongest storm to hit Puerto Rico in nearly a century, and it did so during a 12-year recession, causing more than $100 billion in estimated damage, destroying the power grid and forcing businesses to remain closed for months.
Overall, Maria was the most expensive catastrophe for the insurance industry last year, with losses amounting to $32 billion, higher than Hurricanes Irma and Harvey, according to a report from Swiss Re, a reinsurance company based in Switzerland.
Insurance companies in Puerto Rico have paid a total of $4.4 billion in claims, but more than 13,600 claims have not been closed, according to a report from Puerto Rico’s government. The report shows that 65 percent of overall claims were closed with payment and 30 percent without payment.
The commissioner’s office recently opened an audit into all companies, and Rivera said he is looking at some more closely than others, although he declined to name them. His office has received some 1,600 complaints, which is nearly three times the number it reports receiving in a normal year.
Last month, the administration of Gov. Ricardo Rossello sued various insurance companies after officials said they did not respond quickly enough to claims filed after Hurricane Maria. They said the lawsuits aim to prevent companies from dropping claims because they have allegedly expired. The lawsuits also seek $2.6 billion in damages for those who have not been compensated.
The fight comes as a federal control board that oversees Puerto Rico’s finances approved a five-year fiscal plan Tuesday.
But hours after it was approved, Public Affairs Secretary Ramon Rosario said the administration has obtained permission from a judge to go to court to fight the plan and try to limit the board’s powers.
The plan in part estimates that $82 billion in federal hurricane recovery funds will help briefly boost Puerto Rico’s economy — which appeared to prompt a tweet from President Donald Trump saying the U.S. will not bail out the island to pay its debts.
“The people of Puerto Rico are wonderful but the inept politicians are trying to use the massive and ridiculously high amounts of hurricane/disaster funding to pay off other obligations,” he wrote.
Rossello and other leaders in Puerto Rico have argued that the plan is too austere.
In a tweet Tuesday, Rossello wrote that he agrees with Trump that hurricane relief should not be used for debt payments, adding “that’s why I’m opposing the Oversight Board’s outrageous plan that would severely hamper Puerto Rico’s recovery and growth.”
San Juan Mayor Carmen Yulin Cruz, who publicly pleaded with Trump for a swifter federal response in the wake of Maria, also said in a tweet directed at the president Tuesday that “we finally AGREE on something.”
A White House spokesman did not return a request for elaboration on the reasoning in Trump’s tweet.
Board executive director Natalie Jaresko said the funds are not budgeted for debt payments nor used to determine budget surpluses or deficits, but that they will help stimulate the island’s economy.