By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Private insurance covered just 13.5 percent of the $105m in damages and losses inflicted by Hurricane Joaquin in the southern Bahamas, a newly-released study has revealed.

The report found that just $14m of the devastation inflicted on several Family Islands in early October 2015 had adequate catastrophe protection, highlighting the drain imposed on an already-strained public treasury by the low level of insurance penetration in less-populated regions well away from Nassau.

"The level of insurance penetration decreases as one moves south along the chain of islands in The Bahamas," said the joint study by the Inter-American Development Bank (IDB) and Economic Commission for Latin America and the Caribbean (ECLAC).

"A preliminary assessment by the Bahamas Insurance Association (BIA), with available data up to 1 December 2015, which is enhanced by information from the Insurance Commission of the Bahamas (ICB), suggests that gross losses to the insurance industry caused by Hurricane Joaquin is approximately $14m; that is 13.4 percent of the total estimated damage."

The data will likely be seized on by the BIA and its members as further evidence to support their argument that all property and casualty insurance products should be 'zero rated' for VAT purposes, given that this would help to reduce already-high premium costs and make coverage more affordable and accessible.

The Joaquin report's findings that almost 90 per cent of damages and loss was uninsured, or underinsured, further illustrates the burden of post-disaster recovery financing that is continually heaped on the Government and its struggling Public Treasury - a situation that is unsustainable.

Still, the IDB/ECLAC study blamed a lack of insurance industry competition as well as high costs for the lack of coverage penetration in the southern Bahamas and Family Islands in general.

"From all indications, the insurance cover ratio in the affected Family Islands was low," the report said. "This is partly due to the high cost of insurance coverage, which is a function of weak competition in the sector and the location of the Bahamas in the Atlantic hurricane belt.

"There is therefore a need to incentivise citizens and businesses that can afford it to insure their properties and assets. As far as possible, citizens should be encouraged to take out full coverage for their properties but, realistically, it is expected that high costs mean that many would continue to underinsure.

"Further opening up the insurance market to attract more players could also boost competition and drive down the costs of premiums. This would make insurance more affordable to a wider cross section of the population."

The IDB/ECLAC assessment continued: "The likelihood of events such as Hurricane Joaquin, and the development of settlements in risk areas, underscore the pertinence of household insurance. This is particularly relevant considering that the Government of the Bahamas has undertaken the task of reconstructing private homes, which exerts pressure in the country's Budget.

"Besides public financial measures to minimise the risk faced by these assets, it is imperative to raise awareness among the population and inform them about the risks faced by their communities. The recurrence of these types of events should encourage the widespread use of insurance, especially if the Government is subsidising the reconstruction process. Therefore, a key component in a disaster risk management plan should be education and awareness regarding the critical need for private insurance."

The study, though, acknowledged that private insurance "is not expected to be adequate given the significant losses that could result" in major hurricanes, meaning the Bahamas needs to put in place other disaster recovery financing mechanisms.