Bahamian policyholders are opting to forego expensive medical and some catastrophic insurance as local companies hike premiums in order to get American insurance underwriters – still reeling from billion-dollar claims – to renew their policies.
At the first business luncheon of the Bahamas Brokers Association, national and international insurance experts yesterday confirmed the country's worse fears: The insurance industry is in turmoil.
Following September 11 terrorist attacks, international insurance brokers are still wading through claims that some say might take years to legally settle.
"It was the largest catastrophe that the insurance industry has ever had to deal with in its history and it was man made," said Alexander Moczarski, regional head of Marsh International Specialty Operations.
He was addressing around 100 insurance representatives and government officials on Wednesday.
The President of Argentina's Association of Foreign Insurance Companies and former member of the International Insurance Society said terrorism's impact on the insurance industry range between $37 to $85 billion – a figure that overshadows Hurricane Andrew's $20 billion worth of claims.
Mr. Moczarski noted that it is going to take at least five years before American insurance firms are able to place a final price tag on the effects of terrorist acts that took place 366 days ago.
"There have been substantial differences between initial estimates and the amounts finally paid out," he pointed out.
"The first World Trade bond was initially estimated to have cost insurance companies $250 million, but firms ended up paying double that amount. The estimate on the World Trade Center was around $16.6 billion, but now it's estimated to be between $45 – $80 billion."
Bahamians will continue to feel the insurance pinch, as hard financial times in the United States industry means local firms are hiking rates to get their customers contract renewed, according to VP of the Bahamas Insurance Brokers' Association, Jeanine Lambkin.
"There's been a reduction in the capacity for the catastrophic market and so the capacity for reassurance have been reduced, which affect our insurers operating here in the Bahamas.
"If they can't get their risks reassured then they can not offer the coverage to local people or it has to be offered at a higher cost," Mrs. Lampkin explained.
"That's one of the reasons why rates have been increasing as tremendously as they have in all lines of coverage, not just property but health and car, all of that," she added.
The industry now has to figure out ways to do business differently, she said.
"Before, some persons might choose to insure their house for catastrophe coverage, but now they are saying, 'No I don't need the insurance' – if their banks allow it.
"Unfortunately, in health insurance a lot of people are saying they can not afford it anymore and are choosing to go without, or they are just hanging in there, trying to do the best that they can," Mrs. Lampkin said.
