19th July 2024
Insurance companies in the Caribbean are anxiously assessing what could be as much as US$500mn in losses following the destruction caused by Hurricane Beryl.
The storm, which made history as the earliest category 4 hurricane on record during the Atlantic hurricane season, left a trail of destruction from as far south as Trinidad and Tobago to Texas in the US.
Now that the dust is settling, the claims are rolling into insurance companies by the hundreds.
Noted catastrophe risk modelling company, Karen Clark & Company has estimated that private insurance companies in the Eastern Caribbean (where the tri-island state of Grenada, Carriacou and Petite Martinique and St Vincent and the Grenadines were hard hit) and Jamaica are staring down the barrel of close to US$510mn in losses.
Prior to reaching Jamaica’s shores, the storm also impacted areas of Haiti and the neighbouring Dominican Republic on the island of Hispaniola.
Insurers in the US and Mexico are also expected to face costs of US$2.7bn and US$90mn, respectively.
Speaking to the media after the passage of the hurricane, officials estimated a 95% loss of the housing stock on Petite Martinique and up to 98% in Union Island and Canouan.
“One hundred percent of the persons on Union Island and Canouan have been impacted,” said Elizabeth Riley, Head of the Caribbean Disaster Emergency Management Agency (CDEMA).
While assessments are at an early stage, it is expected that the damage in the Caribbean will run into the hundreds of millions according to regional leaders.
However, given the relatively low rate of home insurance penetration, only a fraction of this will likely fall on the insurance companies. For example, Prime Minister Ralph Gonsalves of St Vincent and the Grenadines reported that only 79 of the 1,300 houses on Union Island have insurance, and a total of 346 out of close to 6,000 on all the Grenadine islands.
Unfortunately, the average homeowner in many Caribbean countries only acquires home insurance to meet the requirement for a mortgage. Since a significant proportion of homes are built in stages ‘out of pocket’ and without a mortgage, insurance penetration is often low.
“Just for today, we had 20 claims coming in,” said GK Insurance Claims and Legal Manager, K Michelle Reid in a Jamaica Observer interview days after the passage of Beryl.
Other insurance companies including British Caribbean Insurance Company (BCIC), and IronRock also reported an uptick in claims both for buildings and in some cases for damage to vehicles.
“Once there is a storm there is usually an uptick in insurance interest. Certainly, there were a few instances of people whose policies had expired, and they were getting in touch with us to reinstate them,” said Peter Levy, Managing Director at British Caribbean Insurance Company (BCIC) in a Sunday Finance interview.
He also believes that what happened with Hurricane Beryl is that the notice was such that there was only one working day for people to get the coverage they needed, thereby causing many to remain uninsured as the storm made landfall in Jamaica.
With insurance premiums across the region already on the increase since the beginning of the year due to spiralling reinsurance costs, there are fears that Hurricane Beryl and future storms this season could push those premiums even higher.
Some analysts have also blamed higher interest rates in the Caribbean and across the world for the increase in insurance premiums. Investing in insurance companies is now less attractive since it is now relatively easier now for investors to earn higher returns on other securities.
With global inflation slowing and central banks signalling likely interest rate reductions, insurance companies are hoping that investors return to the market.
“So far, we have our fingers crossed, we’re hoping that this isn’t the event that pushes rates up further, but we will wait to hear. And of course, the sobering thing is, we’re only at the start of the hurricane season, with the forecast being predicted for a record amount of storms,” lamented Bruce Ferguson, President of the Bahamas Insurance Brokers Association.
“Obviously, the Caribbean insurers have taken a hit on the Caribbean islands… It was moving fast, which is often a good thing,” said Ferguson, making reference to slow-moving Hurricane Dorian which devasted The Bahamas over a prolonged period.
In 2022, President of the General Insurance Association of Barbados (GIAB), Randy Graham reported that an estimated US$55bn in claims was paid out by reinsurance companies for damage caused by hurricanes in that year, ultimately driving up insurance premiums. With a possible price tag of US$500mn for insurance companies from Hurricane Beryl alone, it is expected that they would turn to their reinsurers to cushion the blow.
Both categories of insurers now wait with bated breath to see what costs will come during the remainder of the hurricane season.
Photo: AP Photo/Lucanus Ollivierre
