‘There’s no nice way of putting it.’
That is what Nigel Twohey of the Cayman Islands Insurance Association told a sold-out Chamber of Commerce Luncheon audience at the Wharf Restaurant Thursday about the future of insurance premiums here.
Mr. Twohey, along with industry associates Robert Stewart and Ken Chand, all had ominous words for insurance consumers looking into the future: the premiums will all be higher, perhaps approaching 300 percent more, and they will be here for a long time.
As for home owner’s insurance, Mr. Twohey said the premium rate before Ivan was about 1 per cent, or a little less, of the insured value.
‘Now we’ll see premiums up to 2 per cent, and maybe a little bit more,’ he said.
Prior to Ivan, the standard home owner’s insurance deductible was 2 per cent of the insured value. After Ivan, that number rose to 3 per cent.
Home owners wishing to keep their deductibles at 2 per cent will likely have to pay premiums of nearly 3 per cent of the insured value, almost triple what they paid before the hurricane.
Mr. Twohey said the insurance companies here will not be earning large profits from the price increase.
‘Our pricing has gone up, and all we’re doing is passing on the cost,’ he said.
Pointing out that 2004 was the worst year for insurance claim pay-outs in history, with some $42 billion paid globally, Mr. Twohey said that the cost of reinsurance would increase everywhere.
However, reinsurance costs will go up even more in Cayman than in other Caribbean countries like Grenada, even though it also took a severe hit from Ivan.
‘Grenada is very far south and still not considered a high risk for hurricanes,’ said Mr. Stewart, ‘Cayman is perceived to be more toward the centre of the bull’s eye.’
Other factors like the prevalent use here of drywall, along with chipboard furniture and cabinetry, all increase the perception of damageability in the Cayman Islands in relation to hurricane risk, Mr Stewart said.
Because of the enormity of the this year’s claims, and the now recognized increased risk of the Cayman Islands to hurricanes, residents here should expect to pay higher insurance rates for quite some time.
‘Cayman should not assume that within a short time – like one or two years – even without storms, that premiums will drop significantly,’ said Mr. Stewart.
The story was much the same for automobile insurance.
‘It’s safe to say we’ll have an increase in premiums,’ said Ken Chand about automobile reinsurance. ‘We have to pass that back on to the customer.’
Mr. Chand said even third-party liability insurance has increased 25 percent because of the recent liability claims paid out in excess of $1 million.
‘You won’t find premiums going down,’ he said. ‘What you’re seeing now is the bottom end. With the reinsurance premiums going up in June or July, auto premiums will be increasing another 10 to 15 per cent.’