The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian insurers were last night facing “the perfect storm” in Hurricane Matthew, having rated the chances of a ‘direct hit’ on New Providence and other major population centres at “50/50” prior to its latest forecast track.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that a Category 3-4 storm striking New Providence directly would cause losses equivalent to 3-5 per cent of total sums insured.

While declining to place a dollar figure on this, Mr Saunders said that losses/damages could rise as high as 5-7.5 per cent of total sums insured should storms with the power of Hurricane Matthew score a direct hit,

The RoyalStar chief said there were still various tracks and scenarios that could affect Hurricane Matthew, but he warned: “We’re not ruling out a direct hit on New Providence.

“We are planning on the worst case scenario that Nassau will be impacted, as well as Grand Bahama and Abaco, and we are building up our resources to deal with that scenario at this time. That’s 50/50 now until we know with any clear certainty that nothing’s going to happen.”

Late afternoon forecasts, which shifted Hurricane Matthew’s projected track to the west, taking it directly over New Providence and Freeport, and placing Abaco on the stronger side of what is predicted to be a Category Three storm, is the worst nightmare for both property and casualty insurers and the Bahamian economy.

In such a scenario, the Bahamas’ three major population and economic centres, with the highest concentrations of insurance risk, will be impacted by a hurricane that has the potential to create catastrophic damage.

“If it comes across as a Category Three or Category Four, we would project, based on our computer models, that if it hits directly New Providence or Nassau, it would range from 3-5 per cent of the aggregate [sum insured] being damaged,” Mr Saunders told Tribune Business.

“That’s what the amount’s going to be around for the loss. If there’s a direct hit, it can go from 5 per cent to 7.5 per cent.”

Mr Saunders said RoyalStar had placed a moratorium, or bar, on taking on any new property and casualty insurance business until Hurricane Matthew had passed.

He pledged, though, that existing clients with renewals coming due would see their policies “honoured 100 per cent”, while quotes written prior to the storm’s approach will receive the same treatment.

“There will be no new business or change in sums insured during this period,” the RoyalStar chief reiterated.

He confirmed that international loss adjusters had already been placed on standby to fly into the Bahamas to deal with damage/claims assessments in Matthew’s wake.

“We are not ruling anything out right now,” Mr Saunders told Tribune Business in relation to Hurricane Matthew. “We have never seen where a hurricane coming from the south can go straight up the Bahama chain. We have never seen something like this before.”

Hurricane Floyd in 1999, and Hurricane Frances in 2004, are probably the most recent comparisons to Matthew in terms of track and intensity.

Mr Saunders, though, sought to reassure RoyalStar clients that the property and casualty underwriter would be there to assist them financially in recovering from any hurricane-related losses.

“At the end of the day, this is the business we are in,” he told Tribune Business. “We don’t cry over spilt milk. We will do what is necessary to ensure our clients are protected, and we hope and pray there is no loss of life.

“What we have is through the protection of reinsurance, and our balance sheet, we are able to withstand whatever comes our way, and will be fully prepared if Matthew comes our way. We are preparing for the worst and hoping for the best.”

Tom Duff, general manager of Insurance Company of the Bahamas (ICB), described Hurricane Matthew as “the perfect storm” for both the wider nation and the insurance industry if it travelled on its newly-projected path.

“It seems the Bahamas is not going to be spared,” he told Tribune Business. “It’s clearly going to hit some part of the Bahamas.

“Right now, the most popular forecast seems to have it heading closer to New Providence, unfortunately, and heading further north. From an industry point of view, that’s the worst case scenario.”

While Hurricane Joaquin, a Category Four storm, last year inflicted massive damage on the south-central Bahamas, the losses incurred by the Bahamian insurance industry and their reinsurance counterparts were relatively low, given the minimal insurance penetration in these islands.

However, Hurricane Matthew is now forecast to directly impact the major urban populations of Nassau and Freeport, plus Abaco.

“Whatever it hits is awful,” Mr Duff said of Matthew, “but if it tracks east of New Providence that’s a favourable outcome from an insurance perspective because it will get the weaker side of the storm.

“Purely from a business perspective, the worst outcome will be that it continues to track further west and hits New Providence.

“If it does that and hits Grand Bahama, and Abaco gets a chunk as well, that will be a perfect storm from an insurance perspective.”

Should such a scenario materialise, Mr Duff confirmed that potential damages - both insured and uninsured losses - would be “a totally different ball game” compared to what occurred in Hurricane Joaquin.

He added that Matthew’s strength and slow pace of movement were also worrying.

“I can’t deny that it’s a big concern, and we won’t be relaxing until we know where it is in relation to New Providence, Grand Bahama and Abaco in particular,” Mr Duff told Tribune Business.

“I’m trying to stay positive; that’s all we can do. We have to accept we’re here to provide a service, and this is the business we’re in. We have to accept that this is when our service is needed.”