Eighty percent of homes and businesses destroyed or damaged during the passage of Hurricane Dorian were uninsured or underinsured, according to Acting Prime Minister Peter Turnquest, who yesterday lamented the heavy burden of government to fill in the insurance gap.
Turnquest said having to fill that gap for the private sector and private citizens significantly threatens the country’s finances and credit standing with international rating agencies.
“When a storm hits, the damage and loss to the private sector is significantly larger than the damage and loss suffered by the government. In recent times, cultural and political pressures are forcing more and more public resources to be spent to cover private sector insurance risk gaps. There are, unfortunately, too many Bahamians that take on unmanageable and unsustainable risks by not taking out insurance coverage on their homes and businesses or are underinsured in both,” Turnquest said yesterday.
“In the event of a significant loss, this exposure is transferred to the government, which is neither tenable nor is it budgeted for, and thus poses a substantial threat to the country’s finances and its credit standing. Initial assessments of uninsured risk from this storm are as high as 80 percent, meaning only 20 percent of those who suffered loss actually have some kind of insurance. This is tremendous exposure for us financially and socially.”
Turnquest said because of these losses, the government expects its deficit – which it has spent the past two years reducing to below one percent – will likely balloon to five percent of gross domestic product (GDP) this fiscal year.
The acting prime minister also lamented the practice of Bahamians failing to adhere to building codes.
“As Bahamians, we love to cut corners and maybe tip the guy or the girl to look the other way, speed up the process, but when you observe the level of building failure due to poor construction techniques, it’s alarming and a costly gamble with property and with life,” Turnquest said.
This, he added, has aided in catastrophic destruction during strong storms and will likely lead to increased insurance renewal premiums which are already prohibitive for Bahamians, further challenging home ownership for many.
“The best thing is to do it right the first time,” said Turnquest. “Proper investment upfront will avoid the costly recovery of unexpected business interruption. Proper infrastructure also reduces assessed property risks and thus helps maintain affordable insurance premiums.
“The more loss we have the more the insurance premiums will increase. I was just down in Barbados where this was the topic. One of the things the insurance industry presented is this: they expect to see as high as a 30 percent increase in insurance premiums.
“That is significant because we know that insurance premiums are already expensive for Bahamians, so you can imagine what that is going to mean for renewals. So, we need to make sure we do the things we can do and the things that we can take care of, to help mitigate that risk and protect ourselves from the rising cost of insurance, the rising costs of getting our lives back together.”
Turnquest said the government is looking at some incentives that would encourage both businesses and individuals to take out adequate insurance.
In September, the Bahamas Insurance Association estimated that insured costs as a result of damage from Hurricane Dorian would conservatively top $500 million.