Summit’s Matthew Loss Peaks at $37m

In News Releases by Summit Insurance

By Neil Hartnell, Tribune Business Editor

A Bahamian insurer yesterday revealed it had incurred $37 million in gross losses from Hurricane Matthew, and warned that “some small increase” in local insurance premiums may result in 2017.

Tim Ingraham, Summit Insurance Company’s president, said some reinsurance industry players – particularly those forced into making Hurricane Matthew-related payouts – were “pushing rates northwards”.

Given that Bahamian property and casualty insurance premiums are largely dictated by reinsurance costs, a slight price increase is “anticipated” locally when 2017 renewals come due.

But, emphasising that the reinsurance market was highly competitive and had significant capacity, Mr Ingraham said it was currently impossible to determine the extent of any premium rate increases.

“From recollection we looked at around 1,500 claims and somewhere in the region of $37 million in gross payouts before reinsurance,” he told Tribune Business, adding that the latter – rather than Summit – would absorb the bulk of the loss.

“As far as the number of claims, we are somewhat through them,” Mr Ingraham added. “There are a few larger, more complex claims taking a little more time.

“We’re hopeful of moving to a conclusion sooner rather than later, as at this point there are just a few of them. Hopefully, in the next month or so, we will wrap them up. Our philosophy is that the best claim is a settled claim.”

Mr Ingraham said claims might be outstanding for reasons as simple as an inability to contact absentee second homeowners.

“It’s been a fairly big loss for us,” he added of Matthew. “It could have been a lot worse for us if the storm had been 10 miles further east when it passed New Providence.

“When it first passed through, we initially had slightly higher loss estimates, but when it settled down the numbers were reasonable and where we expected them to be once we did the full assessment.”

The Bahamas Insurance Association (BIA) estimated that the total nationwide insured loss from Hurricane Matthew would be around $400 million within days of the storm’s passage, and has not deviated from that estimate – a record loss for any single catastrophic event/natural disaster to hit this nation.

Adding Summit’s $37 million in gross losses to the $90 million and $80 million incurred by RoyalStar Assurance and Bahamas First, respectively, means that collectively those three underwriters alone have paid out more than $200 million in claims to Matthew victims.

Given the scale of the loss, and the fact that foreign-based reinsurers have shouldered most of the payout burden, it is little surprise that they may be seeking higher rates from Bahamian property and casualty insurers in 2017.

Given that the latter have to buy huge quantities of reinsurance to enable them to underwrite all their Bahamas-based risks, it is the reinsurers that effectively dictate consumer premium rates, with cost increases often passed on to consumers.

“We have seen some reinsurers pushing rates northwards because of their losses; we’ve definitely seen that,” Mr Ingraham told Tribune Business.

“As we’ve tied down renewals, we’ve definitely seen some increases from reinsurers, especially the ones responsible for paying the Matthew losses.”

However, the Summit president said it was still too early to determine the extent of any premium rate increase for Bahamian consumers, and if this would occur at all.

“It’s really early days and difficult to say,” Mr Ingraham said. “Things are crystallising as time goes on, and we expect by the middle to end of March we’d know where the market is.

“It’s still a competitive market, and we anticipate seeing some small increase depending on the size of the loss in the storm. It’s impossible to give one answer to this question because there are so many variables.”

Tom Duff, general manager of Insurance Company of the Bahamas (ICB), the carrier through which BISX-listed J. S. Johnson places much of its property and casualty business, said it was up to individual underwriters to determine how reinsurance pressures fed into client premiums.

“It’s down to individual companies to enter into negotiations with reinsurers,” he told Tribune Business. “We have got our programmes placed like most companies have, and obviously last year reinsurers suffered a very substantial loss from the hurricane.

“We’d imagine that all countries in that industry are trying to redress that balance this year, and what we’d hope is that this year will be a good one and provide some measure of payback for the losses suffered in 2016.

“All companies will be doing their best to try and assist reinsurers given the big payout from last year. Whether that transfers into individual premiums, it’s up to individual companies to determine.”

Mr Duff said ICB, like Summit, was completing settlement of larger, more complex Matthew-related claims – a process it expects to be finished by the end of March or early April 2017.

“After another couple of months we’ll be getting to the end of the process,” he told Tribune Business. “We’re working our way through those.

“I think that in the next four to eight weeks we’ll be sure to wrap up the whole thing.”