Primary insurance carriers located in the Bahamas are set to take around $1.5 billion of losses following the impacts of claims from hurricane Dorian earlier this year, according to the local insurance association.
As a result of the high levels of claims to be paid by local Bahamian insurance carriers, there is an expectation of significant reinsurance rate increases when they come to renew their coverage.
The Bahamas Insurance Association told the local Tribune newspaper that the impact of hurricane Dorian could result in local insurers shouldering $1.5 billion or more of claims, with over $1 billion already reported.
Some carriers have yet to report their losses from Dorian, but already the figure has risen far above where early estimates sat for the impact to the local insurance community.
International insurance and reinsurance carriers are set to take a significant share, with many international carriers active on the islands and carriers often using large amounts of reinsurance to protect their businesses.
There is a concern however, that some local carriers were not as well reinsured as they could have been for an event such as Dorian, which could lead to greater reinsurance use in future as renewals come around and these companies look to reinsurance capital to help them sustain businesses that have been so decimated by the impact of Dorian’s claims.
Interestingly, the Association reported that claims volumes are actually below that seen in 2016’s hurricane Matthew, but claims from 2019’s hurricane Dorian are far more severe and larger in size.
“I don’t have details from all insurers yet, but from those insurers that have already reported we’re looking at over $1bn in insured losses,” Warren Rolle, the Bahamas Insurance Association’s (BIA) chairman told the Tribune newspaper. “We’re not seeing the volume of claims we saw in Matthew, but the severity is much more significant than we saw back then.”
“Matthew was approximately $400m, but I think it’s definitely going to be…. I know some estimates place it at $1.5bn,” he continued. “We still have a few insurers yet to report. As it stands now we’re just over $1bn.”
Rolle said that reinsurance rate increases are expected at the upcoming renewals for Bahamas insurers, but he doesn’t expect there to be any lack of capacity for hurricane exposed risks as there remains plenty of reinsurance capital around.
But reinsurers are likely to hike rates considerably and with many local and regional Caribbean insurers having faced consecutive years of losses, while being relatively thinly capitalised themselves and reliant on reinsurance, the impacts of higher priced coverage is likely to result in increasing insurance rates at the primary end of the market.
The economic impact of hurricane Dorian in the Bahamas has been estimated at as high as $7 billion, with as much as $3 billion potentially covered by local and international insurers and reinsurers.
It is the largest loss in dollar terms that the islands have ever suffered and clearly demonstrated the potential for significant damage to occur there, which should mean reinsurers re-rate their business on the islands and push hard for increases to reflect the threat of similar losses occurring in the future.