By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian insurers yesterday warned Hurricane Irma could cause a 20-25 per cent increase in premiums and “capacity” issues, depending on the hit Florida and this nation take.

Anton Saunders, RoyalStar Assurance’s managing director, warned that “significant damage” in Florida could have greater local insurance market implications than if Irma copied Hurricane Matthew in striking New Providence and Grand Bahama.

Florida and the Bahamas largely share the same global reinsurers, and Mr Saunders said a multi-billion dollar damages payout in the ‘Sunshine State’ would make these companies more reluctant to continue coverage here given this nation’s close proximity.

Bahamian insurers, due to their relatively thin capital bases, purchase huge quantities of reinsurance to enable them to underwrite property and other assets that have a collective multi-billion value.

Mr Saunders thus emphasised that any capacity withdrawal as a result of Florida-based losses would make it difficult for Bahamian insurers to obtain the reinsurance needed, putting even greater pressure on catastrophe premium rates than if Irma’s destruction was confined to the Bahamas.

“We have two scenarios,” he told Tribune Business, describing Florida as worst for the insurance industry. “If it’s localised to the Caribbean and the Bahamas, the rates will be increased depending on the loss. It will be between 20-25 per cent.

“If it hits Florida, all bets are off. If Irma hits Florida, and Florida sustains significant damage, our concern would be if we will have sufficient capacity available for the Bahamas. That’s more our concern; whether it hits Florida and if there’s sufficient capacity for the Bahamas going forward.”

Irma is potentially the third major hurricane in three years to score a direct hit on the Bahamas, following Matthew last year and Joaquin in 2015.

“We just hope and pray that if something happens it’s minor, and we are crossing our fingers that we will be spared this one,” Mr Saunders said.

“If it hits Florida, it’s not a matter of rates; it’s a matter of capacity. How much are we going to get? That’s even worse.”

Tim Ingraham, Summit Insurance Company’s president, backed Mr Saunders’ analysis by agreeing that Bahamian property and casualty rates will “head north” should Irma emulate Matthew’s estimated $600 million damages.

He added that the storm, currently with Category Four winds, would be “more of a game changer” for the Bahamas and its reinsurance market than Hurricane Harvey should it hit Florida.

“That would be more of a game changer than Harvey is at this point,” Mr Ingraham told Tribune Business. “Even if we escaped and Florida got hit, that certainly will be a different thing for us.

“A lot of reinsurers that do business here also do business in Florida. That’s the difficulty; being so close to Florida.”

The Summit chief added that Irma’s impact on the Bahamas, and potential level of damages, will be determined by the path it takes through the 700-island archipelago.

“If it goes over the islands to the south, it will not be as significant,” Mr Ingraham said. “If it starts to come up the chain like Matthew, we could see extensive losses, depending on what path it follows and the rain coming from it.

“If that happens, rates will start heading up. Rates have remained fairly level this year following Matthew, except for properties and areas that suffered losses. If we see another one on that scale, we will start to see rates head north. If it’s a huge hit, that’s more than likely.”

Mr Ingraham said Summit was still accepting new underwriting business, given that the Bahamas had yet to be placed under any Irma-related hurricane or tropical storm advisories.

“We’re watching and waiting to see where it goes over the next day or two before making any firm determination or decision,” he added. “We will write until alerts are issued for those areas. Nothing’s been issued yet.”

Mr Saunders, though, said RoyalStar had stopped underwriting new property and casualty risks, and changing existing coverage, on Sunday. “With social media driving the hype, a lot of people out there are panicking,” he told Tribune Business, “so we think it’s in the best interests of our partners and reinsurers to cease new business at this time.”

The RoyalStar chief added that all policies due for renewal, and quotes, would be honoured. Predicting that Irma would match Matthew’s losses ($600 million in damages, $400 million in insured claims) if it followed the same path, he added that underwriters and loss adjusters could have difficulty in determining when property damage was incurred.

“The challenge will be to determine if those people who had damage from Matthew repaired their properties, so that you are not paying double claims on the same loss,” Mr Saunders told Tribune Business.

Mr Ingraham, meanwhile, added of Irma: “After two years in a row of dealing with these things, it’s not something we look forward to; not just from an insurance perspective, but a personal perspective.

“The stress of it all can get to you if you’re dealing with it on an annual basis. From my perspective, I hope this one misses us and gives us a break this year.”