By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian insurers are “trying to hold the line” on property premium rates for 2021 after post-Dorian pressures resulted in increases of up to 30 percent for businesses and homeowners last year.

Tim Ingraham, Summit Insurance Company’s president, told Tribune Business that Bahamian property and casualty underwriters had little choice but to implement rate hikes if they were to maintain insurance industry support in the wake of Dorian’s record $2bn claims payout.

“If you were in an area impacted the by the storm, you might have seen a 15-30 percent increase,” he said of 2020’s rises. “If you had wooden hut on the beach you might have seen a 30 percent increase, but if you had an office block in an inland area, you may have seen a ten to 15 percent increase.

“We, like others, are trying to hold the rates where they are for now. We understand there are other things going on in the economy, so we have to hold the rates where they are. But, as with many things in life, we are in competition for the support of our reinsurers.”

It was the foreign reinsurance partners of Bahamian general insurers, rather than the latter, who financed the bulk of $2bn in Hurricane Dorian insurance claims that were paid out over the last 18 months.

Local carriers’ capital bases are simply too thin to absorb the multi-billion dollar Bahamas-based risks that are exposed to hurricanes on an annual basis, which makes them reliant on reinsurers to cover the majority of any claims. Having taken a huge hit from Dorian, reinsurers are seeking to repair their balance sheets while demanding extra compensation for the increased risk posed by The Bahamas.

“These reinsurers do business in The Bahamas and they do business in Florida,” Mr Ingraham explained. “If we do not give them the type of returns they expect after a loss they’ll shift to territories where they will get a bigger bang for their buck, so to speak. Most reinsurers have finite amounts of capital to deploy.

“We cannot take on all the risk ourselves. No company in this region goes without a significant amount of reinsurance as they don’t have the capital to run that type of risk. If you do $1bn in property insurance business, and let’s say you charge 1.3 percent on that as a premium, and let’s say you get 5-10 percent damage throughout your portfolio, you can see where if you don’t have reinsurance you will have large holes to fill to pay your claims.

“No one in this area goes without it. We don’t have the level of capital to go without it. The risk of hurricanes makes it impossible. If there are one-off fires, that’s fine, but in the case of hurricanes where losses mount rapidly we definitely need reinsurance support.”

Mr Ingraham was backed by Tom Duff, Insurance Company of The Bahamas (ICB) general manager, who told Tribune Business that property premium rates last year increased “certainly by double digits at a minimum”.

“Some of the other islands, the Dorian-affected islands, may have experienced up to 25 percent,” he revealed. “For 2021 I think most of the general insurance companies would have suffered increases in the cost of catastrophe reinsurance, so that would certainly impact insurers holding the line.

“Maybe those insurers that didn’t put on the full thrust of reinsurance increases last year may have to increase a little further this year, but for those insurers that tackled the increase head on they were probably able to absorb reinsurance increases this year.

“Looking at the whole market for 2021, for those insurers that got rate increases in last year you’ll see a consistent approach in 2021. There will not be a need to increase rates. It depends on the approach individual insurers took last year.

“From ICB’s point of view, we certainly increased our rates last year so we’re not looking to do much of an increase in 2021 but, equally, we’re not looking to see any discounts on the horizon. Reinsurers paid out a record $2bn and are looking to recover that loss. There’s no real prospect of any discounts this year.”