The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A BAHAMIAN insurance executive yesterday said that obtaining full property coverage is critical to the ability of homeowners, businesses and the wider economy to build resilience against natural disasters.

Patrick Ward, Bahamas First’s president and chief executive, told the University of The Bahamas (UoB) Business Week that economic sustainability is directly tied to The Bahamas’ ability to recover from hurricanes and other weather-related catastrophes.

He added that this was exposed by Hurricane Dorian, and pointed to the difference in post-storm recovery pace between those who had full all-perils insurance coverage for their properties and those that did not. The former have received financing to fully rebuild their destroyed structures, while the latter are still trying to rebound.

As a result, Mr Ward said those homeowners and businesses who had full insurance cover are “back on track,” and this is “evidence of sustainability once you have insurance kicking in and taking place. You see the recovery that’s taking place as a consequence of that… That sort of speaks to sustainability or indemnity or the ability to recover post an event.

“So what does sustainability look like in real terms, both in a macro sense and on a day-to-day standpoint? What I’m showing you are examples of people who are individually in a position where they’ve been able to recover post an event as a result of the insurance industry kicking in and providing some kind of recovery mechanism.”

The Bahamian insurance industry paid out $1.8bn in claims as a result of Hurricane Dorian, with the ultimate industry payout likely to be as high as $2bn when external insurance claims are taken into consideration.

Mr Ward said: “The Central Bank reported in February 2020, which would have been a few months after Hurricane Dorian, that the foreign reserves in The Bahamas that actually ended the year, 2019, stood at $1.7bn and it was $500m more than the year before at the end of 2018.

“The difference really was as a result of the inflow of reinsurance dollars coming in from the outside into the Bahamian economy to fund the claims that insurance companies” paid out. “There’s no other industry that is more efficient at getting the economy and individuals back on track following a natural disaster event than the insurance industry, and so if we do our role properly it means to restart that flow of recovery in a way that nobody else can,” Mr Ward added.

The Bahamas First chief, though, said the insurance Industry needs policy support to get over the “hurdles” to sustainability, particularly with regard to ensuring that building codes are up to standard and enforced.

Mr Ward said: “The other thing that we need to focus on, and it’s really more of a state issue, is the modernisation of our building codes. In addition to that, the mandate from the Government to have a greater level of enforcement as it relates to whatever those new guidelines are, because having a building code that cannot be enforced is really no good.

“But there are some things that we’ve learned from Dorian, and from other storms, that we need to incorporate into some revised building codes. If we do that I think we have a better chance of being more resilient when the storm activities do occur, because they will occur with more frequency.

“Lastly, is that we just have to have an acceptance of the reality that we have to just basically reconsider what is an appropriate building code for The Bahamas as it relates to where we allow for zoning in certain areas.”

Warning that climate change will continue to shape the insurance industry and The Bahamas, Mr Ward said: “There are a number of other factors that we need to think about when we think about sustainability, and then making that next step in terms of building resiliency in terms of knowing what are the things we’re going to do in order to facilitate more resiliency within our economy and the different sectors that contribute to that effort.

“So one aspect.... that we need to think about is that every small increase in global average temperature results in a significantly larger increase in the probability of extreme natural events. So this is a significantly disproportionate relationship between the small changes we think will create small events. No, small changes in global average temperatures will result in significant or extreme changes on the other end of it.”