Gov’t spreads insurance risk

The Cayman Islands Government has taken steps to spread the insurance of its $402 million of assets among a range of insurers, said Budget and Management Unit Director Michael Nixon.

‘We wanted to get participation from as many insurance companies as possible,’ he said.

The new government insurance strategy comes after learning a costly lesson from the Hurricane Ivan experience. At the time of Ivan in September 2004, the Government had placed all of its more than $300 million of insured assets in one insurance basket; that of Cayman General Insurance.

In addition to the Government’s adjusted claim of $108 million, which was adjusted to $70 million, CGI had to pay out another $200 million in claims. In the end, the Government took a 24.2 per cent stake in CGI in lieu of $20 million of the insurance claim.

Mr. Nixon said that the government’s assets are now spread among about five different companies. Some companies insure as little as 10 per cent of government’s assets and one company insures about 25 per cent of government’s assets.

Even though the one company insures about $100 million of government assets – which is more than the CGI claim – Mr. Nixon said the Government is comfortable with that high of a portion because a claim for the whole amount is very unlikely. As a comparison, Government’s claim after Ivan was for only about one-third of its insured assets.

In addition, Mr. Nixon said the Government’s insurance broker, Willis Group, was instructed to look closely at the reinsure coverage behind any company providing insurance coverage to the Cayman Islands Government.

‘That’s an important part of what they do; vet the quality of reinsurers,’ he said.

Mr. Nixon said the insured assets include all of Central Government’s assets plus those of certain statutory authorities and other entities, including the Health Services Authority; the Port Authority; the Cayman Islands Airport Authority; the Turtle Farm; and the Tourism Attraction Board, with operates the Botanic Park and Pedro St. James.

An increase in Government assets since Hurricane Ivan reflects new assets such as the Port development, the Turtle Farm development, newer vehicles and the retrofitting of buildings after the storm, Mr Nixon said. The Tower Building is now off the Government’s insurance books.

The Government does still maintain a significant risk with its vehicles, however, because, in general, only vehicles five years old or less are insured with comprehensive coverage.

Therefore, of the Government’s 816 insured vehicles, about 33 per cent of them are covered only with third-party insurance.

Some higher-cost specialty vehicles, such as fire trucks, ambulances and various heavy equipment, are insured comprehensively even though they are more than five years old, Mr. Nixon said.