Wednesday, September 13, 2017
By NEIL HARTNELL
Tribune Business Editor
The Bahamas will receive a $234,000 Irma payout from the Caribbean disaster insurance facility that the Christie administration previously withdrew from, it was revealed yesterday.
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) confirmed that the Bahamas will receive the payment on its tropical cyclone (TC) insurance policy within the next two weeks.
The Bahamas’ payment is less than 1 per cent of the total $29.646 million promised to Caribbean islands by CCRIF to-date, and likely represents a fraction of the multi-million dollar sum required to repair damage in Ragged Island, Inagua and Acklins.
And while the Bahamas is receiving more than Haiti, CCRIF said the damage in these two nations did not meet the threshold that would trigger payments.
“The payments that are due to both countries are based on the Aggregate Deductible Cover (ADC),” CCRIF said. “At the start of this policy year, CCRIF introduced the ADC as a new policy feature for its members.
“The ADC represents a means by which CCRIF can help its members when modelled losses fall below the attachment point, but where there are observed losses on the ground.”
The Bahamas’ Irma payout is unlikely to halt the political debate over whether the Government should maintain an annual premium with CCRIF, or instead invest such monies in its own self-insurance disaster fund.
Controversy over the former administration’s decision to exit the CCRIF facility was stoked during the Budget debate, when Prime Minister Dr Hubert Minnis read out a letter from its chief executive suggesting the Bahamas had missed out on a $32 million Matthew payout.
Dr Minnis told Parliament: “He (the CEO) wrote: ‘We are pleased that the Bahamas has been a member of CCRIF since its inception in 2007. We are pleased that the Government purchased tropical cyclone (hurricane) policies every year between 2007 and 2014, and also purchased policies for both tropical cyclones and excess rainfall for the 2015-2016 policy year.
“However, we deeply regret that the Government decided not to renew its CCRIF policies for the 2016-2017 year, resulting in the Bahamas missing out on two CCRIF payouts from Tropical Cyclone Matthew.’”
Dr Minnis added: “I note that the annual policy for this insurance facility was approximately $900,000. I was shocked by what the CEO of the Caribbean Catastrophe Risk Insurance Facility went on to say in his letter.
“He stated: ‘Based on the registered losses, it means that had the Government of the Bahamas renewed its tropical cyclone policy for 2016-2017, using the previous year’s policy conditions, the policy would have triggered, resulting in a payout of approximately $31.8 million, equal to the coverage limit’.”
This would have been the single biggest payout, according to the Prime Minister, ever made by CCRIF to any country.
The Bahamas’ excess rainfall policy would also have been triggered, resulting in a payout of $855,874. Those payouts would have been larger depending on the coverage purchased, Dr Minnis said.
The Government subsequently renewed the CCRIF policy, and talked about a maximum $35 million payment that could have been triggered had Irma made a direct hit on this nation.
However, Philip Davis, the Opposition leader, said the Christie administration only withdrew from CCRIF on the advice of several government agencies.
And Tribune Business sources said it ceased paying the annual $900,000 premium after it was advised that the likelihood of ever receiving a payout was “almost zero”.
Following Hurricane Matthew’s passage, Michael Halkitis, then-minister of state for finance, said the Government had ceased the annual premium payments because the Bahamas would only have received compensation in the event of a Category Five hurricane.
Hurricane Matthew came through the Bahamas as a Category Three/Four storm, and Mr Halkitis said the Christie administration had decided to drop CCRIF participation and establish its own disaster fund as “the threshold was just too high”.
And a source familiar with the matter told Tribune Business: “We have been a part of this thing for 20 years, and could never get a claim. Our information was that the likelihood of us getting a claim was almost zero.
“A committee had been put together comprised of persons from the Met Office, Ministry of Finance and other agencies. They submitted a report suggesting that the Government drop it.
“After Hurricane Matthew, the guys from the CCRIF commented on what would have happened if the Bahamas had kept it. That was taken with a grain of salt. It was almost impossible for us to have gotten anything.”
The Chamber of Commerce subsequently criticised the Christie administration for leaving CCRIF. But Emmanuel Komolafe, the Bahamas Insurance Association’s (BIA) chairman, while backing the CCRIF renewal earlier this week suggested that the $35 million maximum would have been “a drop in the bucket” compared to Matthew’s $600-$700 million damage.
The Central Bank of the Bahamas, meanwhile, yesterday said it is not permitting a ‘blanket’ relaxation of lending guidelines as was allowed in Hurricane Matthew’s aftermath.
Commercial banks then were allowed to relax the 45 per cent debt service ratio upper limit ‘across the board’ for storm-hit clients, but the Central Bank is restricting this to specific Family Island clients directly hit by Irma.
Anticipating no “material” impact to bank and credit union loan portfolios as a result of Irma, the Central Bank said: “The Central Bank advises that in the aftermath of Hurricane Irma no general relaxation is being made to existing guidelines on lending to the private sector.
“However, supervised financial institutions (SFIs) may use their discretion to temporarily loosen credit terms in Family Islands where clients have been directly harmed by the storm.”