Gareth Manning, Gleaner Writer
Workers remove rubble after a section of a bridge under construction collapsed on the highway after Hurricane Katrina struck Miami last week Thursday. The hurricane then moved on the the U.S. Gulf Coast wreaking as yet uncounted damage. - REUTERS
JAMAICA COULD start feeling the effects of Hurricane Katrina in its insurance markets by 2007, say industry experts.
With a host of natural and unforeseen disasters over the last five years, insurance premiums have climbed worldwide and could climb again following the fallout from Hurricane Katrina.
The hurricane devastated several United States Gulf Coast states recently, destroying many lives and properties. Industry experts in the United States say insurance pay-outs could fall between US$12-25 billion. This figure excludes uninsured losses which could surmount US$16 billion.
This would make Hurricane Katrina the costliest storm in America's history, surpassing Andrew in 1992. Adjusting for inflation, that racked up US$21 billion in damage. Last year, four separate storms affecting Florida and other east coast states claimed US$23 billion in insurance pay-outs.
Local insurance consultant, Cedric Stephens says it is too early to say if the price of insurance premiums are to go up worldwide as a result of Katrina's impact.
"The financial losses are still tentative, so its difficult to assess," Mr. Stephens told the Financial Gleaner. He said the hurricane should have no short-term impact on Caribbean premiums, however.
" This he explains is because most insurance companies in the region buy coverage on a 12-month basis beginning at the start of the year. Premiums would therefore be based on the price of the coverage set from the previous year.
Andrew Levy, insurance consultant at Jamaica International Insurance Company Limited agrees that it is too early to tell the impact of the hurricane on insurance premiums.
"It's too early to say if it will be contained in the U.S. insurance market or if it will trickle into London and Europe," he said. Premiums will, however, increase in the long term.
"There is no question the insurance industry will need more premiums to cover future claims."
These increased prices may be felt by 2007, once claims are paid out by insurance companies in the next eight months to a year, he says.
Premiums increased between 10 and 15 per cent in Jamaica last year going into 2005 and are expected to increase by the same figure next year, due to the country's vulnerability to hurricanes.
As such, Levy says one should expect insurance rates to go up in Jamaica and other hurricane-prone areas of the region.
Last year, world earnings from insurance premiums rose to US$3,244 billion up from US$2,941 billion in 2003. Life insurance accounted for US$1,849 billion while non-life insurance claimed the remaining US$1,395 billion.
