Fire, floods putting dent in property premium

That’s a big chunk for a country whose entire property premium income right now stands at about TT$600 million; a few years ago it was just about $350 million and analysts say that’s a significant increase.

Still, there is concern that if one disaster like the AS Bryden fire could put such a big dent in the insured property business, what would happen in the event of a full-blown hurricane or bad floods? Already there is talk of raising the property premium pool but to do so insurance companies would have to raise premiums, something the industry is wary about.

Business Day columnist Bernard Aquing (see page 10) said that early indications suggest that insurance companies will have to fork out about TT$100 million-$120 million to cover losses from the AS Bryden fire.

"The fire at AS Bryden was probably the single largest insured loss in the country’s history," he wrote, noting that this could have implications for the entire industry.

"While there have been major fires especially in and around Port-of-Spain including the conflagration that consumed the People’s Mall and surrounding properties earlier this year, losses to the insurance industry were not particularly huge since many businesses either did not have insurance cover or the values were not very high," he said.

However, this is not the case with the Bryden’s loss since they were the agents for some international brand products, including Johnnie Walker, the insurance expert said.

Already, the ripple effect from several disasters like the Port-of-Spain fire and the perennial flooding has left the industry buzzing.

Insurance experts noted that the AS Bryden fire took up about 20 percent of the gross premium in a single loss. It means that a single loss has eaten away at 20 percent of the premium income collected from property business in the entire country. "That is huge," is how one insurance executive described it and compared it to the SM Jaleel fire in 2002 which had losses of about $20 million.

"When you underwrite a risk, you don’t want to suffer loss of more than two percent of your capital. In this instance, this is about 20 percent of the entire country’s premium," he explained.

That, coupled with continuous flood losses and an active hurricane season means that insurance companies are holding their breath.

"This is to be a very bad year for insurance companies," one expert said.

There is also concern what impact such disasters would have on the industry.

One insurance expert is of the view that a lot more has to be done to protect property in Trinidad and Tobago because of the risks involved. If that is not done, businesses could find themselves facing higher premiums, according to sources in the industry.

On the continuous flooding in the capital city, Aquing believes that where it takes only a few minutes to flood, "some properties will be redlined and insurance coverage will not be available.

"Insurance covers uncertainty and if flooding becomes certain then property owners in some areas can expect the insurance industry to refuse coverage altogether or if insurers are minded to come to their rescue the terms of insurance will be punitive."

Property insurance would include among other risks, flood, catastrophe perils — hurricane and earthquake and therefore this class of business will be very severely affected, Aquing said.

"The argument might be, ‘Look at these losses I am paying, being hit by hurricane, floods, fire, what next?’’ said one analyst.

"It may even point to raising premiums," it was noted. Another pointed to the fact that once premiums go up, reinsurance companies see you as a blip on their radar screen, and that’s not a good thing.