By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The government has “agreed” that property insurance must be mandatory throughout The Bahamas with Dorian-related reinsurance inflows giving the external reserves a $1.3bn boost.
The International Monetary Fund (IMF), in its full 2020 Article IV report, said the Minnis administration had backed its call for all buildings to be insured in the wake of the $3.4bn worth of economic losses and damage that category five Dorian inflicted upon Abaco and Grand Bahama where up to 60 percent of structures lacked proper insurance.
“High private sector losses from hurricanes point to the need to improve physical, financial and social resilience against natural disasters. Accelerating adaptation will require improving public investment management and reprioritising expenditure,” the fund said.
“Continued investment in climate-resilient infrastructure can also buffer the macro-fiscal impact of natural disasters. Mandatory property insurance would be a beneficial addition to the multi-dimensional resilience strategy.”
Revealing the government’s reaction, the IMF said: “They also agreed with staff’s recommendation for mandatory property insurance, and pledged to bring a new law to Parliament in 2021 to mitigate risks associated with natural disasters.”
The affordability of insurance coverage, which has become a major issue due to frequent premium rate increases, has often seen homeowners and businesses either drop or reduce coverage - especially if their property is not subject to a mortgage or other bank lien.
While the government has indicated its interest in developing a scheme that would ensure wider insurance coverage in Dorian’s wake, little progress appears to have been made thus far despite the acknowledgement that it may offer social benefits while removing the hurricane repair cost burden from the Public Treasury.
Suggesting that The Bahamas could draw on catastrophe protection schemes developed by New Zealand and Turkey, the IMF said: “The majority of damage caused by hurricanes to The Bahamas is not covered by insurance. The lack of insurance payouts following a large disaster can hinder reconstruction efforts and slow the economic recovery.....
“Private losses account for most of the damage, while private property insurance is largely optional unless the property is financed by a bank. As a result, about 60 percent of buildings destroyed by Hurricane Dorian in The Bahamas were not insured at all or not adequately insured. Government grants to assist with reconstruction are insufficient and present a significant burden to the public purse.”
Still, reinsurance inflows associated with Hurricane Dorian claims provided a $400m boost to the external reserves last year at a time when this was essential due to the drop-off in tourism inflows. This combined with the receipt of $900m in reinsurance monies in 2019 to provide a $1.3bn boost over two years.
“The current account fell back into deficit following a small surplus in 2019,” the IMF said of The Bahamas in 2020. “Net travel receipts were negative for the first time in the second quarter of 2020.
“Exports contracted more than imports (35 percent versus 17 percent) in the first three quarters relative to 2019, but the remainder of Hurricane Dorian related re-insurance receipts - about $400m compared to $900m in 2019 - helped limit the current account deterioration.”
Comments
tribanon 3 years, 9 months ago
Re-insurers are in business to make money and therefore foreign currency outflows to pay reinsurance premiums will always exceed foreign currency inflows associated with the settlement of claims over the long term. But much more importantly, forced property insurance in situations where there is no mortgage lender imposed insurance requirement will only quickly result in property insurance premiums going through the roof. Our whimpy dumber than dumb stupid politicians really need to stop letting the IMF lead them around by their noses. It's all much too embarassing.
bogart 3 years, 9 months ago
The headline on "Mandatory" insurance and your dead right comment on "forced property insurance" raises questions on those in the country who are unaware of the dire economic situation, of existing thousands of homeowners can't pay BPL ele tricity bill and have power cut off, over hu dred thousand on food assistance seems all the way to September and future, thousands unemployed, thousands of homes needing repairs many roofs shingles way beyond life span, many in uninsurable state, etc.
TalRussell 3 years, 9 months ago
if honestly written so as to protect as well is made affordable to all the owners of the structures, mandatory insurance could be a positive move but not anything is written into law by the 35 House-elected red coat capitalist MPs.
By the time of the next hurricane season, the general election bell will have already been rung and voter decided. Shakehead a quick once for Upyeahvote, or pray twice for Not?
GodSpeed 3 years, 9 months ago
and if you can't afford it?
rodentos 3 years, 9 months ago
you go to jail
tribanon 3 years, 9 months ago
And when the prisons and jails are full, the firing squad!
ohdrap4 3 years, 9 months ago
I gave up health insurance 15 years ago. I quit going to a certain doctor because she told me : you are working and ought to have health insurance. Then she slapped me with a huge bill, won't fool me twice. Little did she know my premium would be 60% of my earnings, not even a greedy bank would do that.
All risk property insurance is robbery.
Do these jackasses realize people cannot afford it?
Anyways, if they talk about that again, I will get my "KEEP YA CORNED BEEF" shirt out of storage and get on the road.
empathy 3 years, 9 months ago
Disappointing, but understand your reasons for dropping an unaffordable medical insurance.
Here’s hoping you use that enthusiasm to “protest” for a bipartisan national health insurance that is comprehensive and affordable to most with guaranteed government subsidies to those truly ‘in need’🤞🏽 Everyone deserves affordable modern healthcare.
birdiestrachan 3 years, 9 months ago
I have the same question what if people can not afford to pay the insurance. will they loose their homes and be homeless.
Typically of the FNM Government to make laws that do not make sense.
If one can not afford car insurance they do not have to drive if one can not afford insurance on a building one can not have a home. utter foolishness.
C2B 3 years, 9 months ago
The Insurance Fairy; one my favourite Bahamian myths. Insurance is a business and you can bet the companies that ponied up the $1.3 Billion "boost" will look recover their loss and never repeat the episode. These government people are idiots, but they think they are so smart that they can find suckers to eat losses in perpetuity. If it was that easy we would just buy "incompetent government" insurance and get paid yearly. Problem solved.
TalRussell 3 years, 9 months ago
Abaco is a case study of what happens when you have no insurance replacement coverage. Either you dig deep into savings, you scrape, beg, and sink the family even deeper into debt, or you helplessly accept defeat - bowing the head and walk away, helplessly unable to afford to repair or replace anything, or they wait in a long line for the government steps in or they turn to non-profits for cash handouts or building materials.
Regardless, in the end, the costs indirectly revert back to the PopoulacesPurse which in return ups and imposes new fees and taxes which in the end has been paid for by the PopoulacsOdinary at large POAL.
Oh yes, then there are the fully insured pricks who collected from their insurer, and they still lie about having no insurance who also have no shame be turning to charity. Shakehead a quick once for Upyeahvote, twice for Not?
bogart 3 years, 9 months ago
"...about 60 percent of buildings destroyed by Hurricane Dorian in The Bahamas was not insured at all or were not adequately insured."
The massive destruction shown in the pictures,photographts in media appears to be that of the timbered structures of the illegally built Shantytowns in Marsh Harbour area. These usually wooden structures built without proper Building Permits and Occupancy Certificates seems unlikely to be ever approved for insurance coverage.
It appears that as result of number of conditions that Shantytowns will continue to exist and built and has existed for decades.
Dawes 3 years, 9 months ago
If not mandatory at least say Government will not be responsible for rebuilding private dwellings should a hurricane hit. I know they don't do much now but they still help a little bit. This way everyone will know the risks they are taking if they decide not to get insurance. Sometimes they win, other times they will lose, but it is up to them.
The_Oracle 3 years, 9 months ago
First, regulate the insurance industry properly. Self regulation with mandatory policies equals a state sactioned/mandated rip off. Second, Government brought this on themselves by putting both its feet into rebuilding the private sector, housing and businesses. A total fail thus far as is expected. Government has completely set itself up for fiscal failure, and set the private sector to fail ahead of them. Harsh? maybe, but that doesn't negate the point that Government has created a society in which "a leg up" is damn near impossible, and marginalizing an ever higher % of the population. No matter the level of taxation, only a small part will ever get back to the people who are taxed.
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