The Tribune

EDITOR, The Tribune.

Until recently the public could have been tempted to look upon Chester Cooper as a master of the insurance business and a student of politics. After his numerous bewildering utterances, we must rethink that position. He has come across as new to the insurance business, despite his years in it, and as an overly ambitious opportunist way out of his depth in politics.

Mr. Cooper has earned the right to have letters behind his name attesting to a level of competency in insurance. The people of Exuma have given him the right to affix the letter MP after his name, attesting to the fact that he was lucky enough to survive the May FNM tsunami.

And just as the pundits began thinking out loud that he might have a bright future in front of him within the PLP, Cooper went and spoiled it all by opening his big mouth and giving the most bizarre advice to the government on insurance.

Mr. Cooper believes that the government got a raw deal when they purchased sovereign catastrophic risk insurance from a Caribbean-based facility.

The raw deal was not in the amount we paid, according to him, but in the fact that hurricanes Irma and Maria didn’t pulverize us enough to cause our payout to exceed our premium.

Never mind that the government is first and foremost in the business of protecting its people from harm. And never mind the fact that insurance is only a tool to mitigate the risk of loss of treasure in the event of a natural disaster such as weather-related events.

Even the TV character Flo from the comedic Progressive Insurance commercials in the United States would have been bewildered by Mr. Cooper’s twisted insurance logic.

Apparently in Mr. Cooper’s fertile mind you should always wait to purchase insurance and the optimal time is not just when the hurricane is 50 miles off the coast of Nassau, but it should be bought at the precise moment when meteorologist Basil Dean starts to project that the hurricane is not only headed to your street but has a 100% certainty of destroying your house.

But insurance doesn’t work that way. Over 300 years ago Edward Lloyd (founder of Lloyds of London) started to sell policies to ship merchants leaving London. He decided to collect a fee and pay them for any losses they encountered sailing the high seas.

Sail towards the Caribbean and a possible encounter with pirates or hurricanes and you paid a higher fee. Sail towards America and (in a time before icebergs) you paid a lower fee. The fees covered the spread and everyone was happy.

Fast forward to 2017 and we are feeling the full effects of global warming. Hurricanes are popping up faster and more powerful. Last year, under the PLP, the government let a catastrophic risk policy lapse and we missed out on a $32 million payout from the policy.

The FNM was quick to instruct the Treasury to pay the premium this year and with two more months to go into this hurricane season we have thankfully only gotten glancing blows from hurricanes Irma and Maria.

Still it was enough to trigger the complicated algorithms (which combine rain, wind speed and storm surge intensity) used by the Caribbean Catastrophic Risk Insurance Facility based in the Cayman Islands to disburse an automatic payment equal in this instance to roughly 10% of the premium we paid. Had we taken more of a hit from Irma, we would have gotten a payout over 20 times bigger than the premium we paid.

That is how insurance works. You don’t insure your house against fire and then cuss out your insurance company when you only had minor smoke damage and the cost of repair didn’t meet the deductible. You say thank God you didn’t lose your whole house.

Insurance works when there is a pool of potential beneficiaries paying into a fund. The more people sharing the risk and the more each person does to minimize his risk profile, the lower the premiums will be.

The CCRIF has been so successful in a relatively short space of time that others, including the venerable Lloyd’s of London are studying its methods and copying them.

Mr. Cooper seems to have belittled the CCRIF simply because it is a Caribbean construct run by Caribbean nationals. Overseeing the Board of Directors of the Facility is an American from the state of California who knows a thing or two about catastrophic risk, having overseen the establishment of the California Earthquake Authority and the Rate Regulation Division of the California Department of Insurance.

But that wasn’t good enough for ole Chesty. In a statement, he didn’t just throw his personal opinion into his voodoo insurance rationale, he dragged the entire PLP into it.

His arguments portray a man who is green to politics. According to him the Bahamas should have gone down to the CCRIF and banged the table and demanded that the entire organization do as we say, or else.

What he needs to learn is that politics is the art of compromise. It is about seeking consensus and about doing what benefits the many rather than the few.

Mr. Cooper would be well advised to stop his temper tantrum and try to learn that sovereign risk insurance is separate from any other policy he has ever sold. And as a colleague in the industry, he should show the CCRIF some respect.

They have done such a good job with what the industry calls sovereign parametric insurance that governments in the African Union, and the Pacific Islands Forum are sending people to Cayman to study their methods.

Take note Mr. Cooper – for any government sitting in the middle of hurricane alley, insurance is an investment not a cost.

THE GRADUATE

Nassau,

October 4, 2017.