High insurance cost continues to be a huge concern in VI– Hon Smith
“The rising costs of homeowner insurance policies is a multifaceted challenge influenced by a combination of local and global factors. It is important to recognise that this issue is not isolated to the British Virgin Islands but is part of a broader global challenge,” Hon Smith said in a statement delivered during the Fifth Sitting of The First Session of the Fifth House of Assembly of the Virgin Islands on Tuesday, October 31, 2023.
Climate change a factor - Hon Smith
“In recent years, the world has witnessed a surge in hurricanes in the Americas, wildfires in locations like Australia, Canada, and the United States, as well as devastating flooding in Pakistan and Afghanistan, not to mention the catastrophic earthquakes in Turkey and Syria. Right next door in Acapulco, Mexico, Hurricane Otis recently struck as a Category five hurricane, causing substantial destruction and loss of life,” she said.
Hon Smith added that the annual insurance losses exceeding $100 billion since 2017 have put immense pressure on reinsurers, the same entities that provide coverage to the VI.
“Here in the British Virgin Islands, the escalating cost of homeowner insurance is also driven by factors such as high pay-outs in the wake of Hurricanes Irma and Maria in 2017, inflation, and limited reinsurance capacity for the Caribbean,” she said.
Hon Smith said to address this challenge, Government will consider long-term options, which will include an investigation of the feasibility of lobbying for a regional risk-sharing programme or reinsurance solution, which may involve expanding partnerships with entities such as the Caribbean Catastrophic Risk Insurance Facility (CCRIF).
“In fact, this conversation will jumpstart in early December 2023, as the BVI will be represented when an international body that promotes international financial stability meets to discuss among other issues, climate change, and the impact on the availability and cost of insurance.”
Tackling insurance challenges
More strategies will include collaborating with the insurance industry to develop solutions for managing and mitigating risk associated with natural disasters and more affordable and accessible insurance products and the strengthening of regulatory oversight to monitor the market conduct of insurance companies particularly on the justification for rate increases, offering policyholders a better understanding of why their premiums are rising, and adherence to fair pricing practices.
Hon Smith added that educating property owners about methods to reduce their property damage and insurance risk, such as hurricane shutters and storm surge barriers will also be explored, as well as enforcing building codes and possibly funding the development of resilient infrastructure to mitigate damage caused by natural disasters, which can lead to lower insurance costs.
More plans she said will include the development of long-term strategies for risk management and disaster resilience to reduce the frequency and severity of property, which she said will come as part of a commitment to working with all stakeholders to ensure that residents and businesses have access to the most comprehensive and reliable insurance coverage possible.
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31 Responses to “High insurance cost continues to be a huge concern in VI– Hon Smith”
Insurance companies are private, government cannot influence them in any way, much like the banks.
Do the work the people need!
What I see here is a set of crooks, do something for the people for once.
A major concept of insurance is the Law of Large Numbers, a probability in statistics, which can be employed to estimate the value and frequencies of future losses. The VI is a small bedroom community of approximately 30,000 residents. Consequently, if the VI were to continue to operate outside of large major pool to share in the risks, its property insurance will continue to be high and increasing with climate change and may be unaffordable for many property owners. Nonetheless, property insurance is not only increasing in the VI but also in other locales. For example, the frequency and intensity of hurricanes and resulting high damage cost/pay outs is driving many insurance companies to pull out of some markets, eg, Florida. Additionally, in Texas, counties along its coast are in a special insurance pool, ie, Texas Windstorm Insurance Association (TWIA), an insurance of last resort. What can VI do to make property insurance more affordable.
There is a heavy dependence on government but in regards to property insurance its (government)options are limited to a) setting policies, b) providing some subsidies, c) setting affordable construction standards, etc. As Hon Smith noted, proper owners can take actions to secure and protect their property to prevent and/or minimize damages, ie, boarding/shuttering property to keep the wind out, etc. It is cost prohibitive to insure against every storm, ie, category 5, so the reality is some risk may have to be assumed. One action, though, that government should not take is become the insurance agent or become a guarantor of insurance policies. Government becoming the agent can quickly bankrupt with a major hurricane hitting or a series of smaller hurricanes hitting in close succession. So if government should not become the insurance agent what else can it do?
Government can try to work collectively, cooperatively, and collaboratively with other regional pool to lessen the burden on local property owners. One such pool is CDEMA(Caribbean Disaster Emergency Management Agency), an agency whose functions closely resembles FEMA in the US but without the structure, resources, etc. The CDEMA pool can include millions of people but its operations, and resources need an infusion of capital/ money. One big difference between CDEMA and FEMA is that FEMA is under the umbrella of a central agency, ie, US government; while CDEMA is an agreement among regional countries. Another pool that VI can organize if it does not already exist is a Caribbean OT insurance pool, viz, Anguilla, Montserrat, Cayman Islands, Turks and Caicos Islands and Bermuda.
Disclaimer I’m not a certified insurance agent and the above information is my own personal thoughts and is not advice. Personnel should seek the advice of a certified professional.
The skyrocketing cost of property insurance is real with devastating impacts. Nonetheless, we cannot raise the white flag on this issue. We need creative, innovative solutions to the challenge. Government must take the robust lead in addressing the issue.
For a prolonged period, the BVI was not directly hit by a major hurricane until Monster Hurricane Irma in 2017. The drought of not being hit by a major hurricane resulted in many property owners getting complacent and self-insuring, ie, not buy insurance at all or under insuring. This action proved to be costly in 2017 with many property owners still struggling to recover some 6 years later. The problem is not going to solve itself by procrastination. Proactive action is needed.
Simply, the rule says if a policy holders insures his/her policy for at least 80% of the replacement value, claims would be reimbursed at 100% up to the maximum insured value of the policy. HLSCC can put on some short courses on basic insurance. Furthermore, basic finance should be part of the high school curriculum and should include basic finance.
[Let’s lead as eagles, not follow and careen of the cliff S buffaloes]
its wrong. these insurance companies use irma as an excuse...what about all tye years theyve been taking our premiums when there hasnt been any annual claims.