Higher risk, higher premiums?

Last Saturday, the heart of the city was ripped out by a blazing inferno that lasted some nine hours before it was brought under control by firefighters. In every misfortune there is cause to look on the brighter side. It is mind-boggling to think of the consequences had this fire started some 4-5 hours later (10.30 – 11.00 a.m.) during the height of the Saturday morning shopping and streets congested with vehicles parked on both sides and only allowing traffic to move at snail’s pace! It could have been a disaster of immense proportions with many more blocks affected with the attendant opportunity for looting which would have challenged the security forces on the scale of the 1990 coup.

This is not farfetched but a realistic extrapolation having regard to what occurred in conditions that were not unfavourable to containing the blaze and the actual result, where the People’s Mall and numerous business houses were completely wiped out. I can recall a similar event in 1978 when a small fire started in the very block on the Henry Street side that raged out of control and eventually destroyed buildings as far as Frederick Street. This empty space eventually led to squatting on the site and finally to the People’s Mall — a maze of unregulated construction which was of such a high risk that it was most unlikely that properties would have met the threshold for the purpose of obtaining insurance coverage.

SAD DAY FOR SMALL BUSINESS
While there is no quarrel with small businesses trying to get into the mainstream of commercial activity there are inherent risks associated with that enterprise especially if insurance is not available or at prices that are prohibitive. Obviously bank financing will be difficult to obtain in the absence of insurance and that is simply the reality in the real world. It is heart rending when economic waste happens and there is no insurance in place, and even worse the hardship visited on all the workers,  many of whom cannot be redeployed or find alternative employment.

For those who have purchased insurance things may not be so bad but the country as a whole is poorer on account of such economic waste as the insurance industry has to provide financial resources to replace the destroyed assets. While it is too early to determine the extent of the losses, the insurance industry is likely to emerge relatively unscathed as only those businesses outside of the People’s Mall are likely to carry insurance.

BAD TIMING
However, this loss could not have come at a worse time. Our Caribbean brothers and sisters have been reeling under the insurance premiums they have been made to pay following the spate of hurricanes in 2004. The average premium rate in the Bahamas or Cayman is roughly 4-5 times what the ordinary homeowner pays in Trinidad and Tobago and the international reinsurance market has been applying pressure on local insurance companies to increase premiums since we have both  hurricane and earthquake exposures.

The only reason that premiums have not risen appreciably is that market forces are at work but at some point in time upward movement must take place as this is inevitable. In this age of instant news and communication, the conflagration in downtown Port-of-Spain would have been reported in Lloyd’s List and in the international market and it was no surprise that international players have been requesting loss estimates from insurance companies as early as Monday morning. E-mail: daquing@cablenett.net