"Blown Up"
PREMIUMS
God may be a Trini, is how a local insurance executive described Trinidads experience through one of the most active hurricane seasons the region has seen in recorded history.
The weather authorities may run out of names. Wendy, the last name on the list, may still be a reality even after the official end of this year's hurricane season on September 30.
The cost to regional business has also been tremendous. So far, the three most destructive hurricanes, Luis, Marilyn and Opal, have left Antigua, Martinique, Dominica and large sectors of the southern coast of the United States ruined.
And, despite Trinidad and Tobagos southerly position in the Caribbean chain of islands, a lot of the actuarial studies done on the region includes these two islands as part of the hurricane belt.
This means local insurance companies which wrote general insurance throughout the region and submitted claims for hurricane damage to their re-insurers, may be facing higher premiums next year. If the insurance company only wrote business in Trinidad it may be considered for special treatment, since it will not have made claims as large as those insurers in the other islands, says Bernard Aquing, Managing Director of the Reinsurance Company of Trinidad and Tobago (Trinre).
If a few houses burn down over the course of a year, that is
no problem for the industry to handle, but whenever a hurricane
comes, it will destroy 5,000 
houses
in one blow. It may be several hundred miles wide making its destruction
far worse and widespread than tornadoes or other weather phenomenon
which occur in other parts of the world. The destruction caused
by hurricanes can be so tremendous that the insurance industry
may be unable to regain its losses over the long term.
Unlike most other services in the financial sector, insurance is based on what is perceived to happen in the future.
He said some firms may consider writing business if they think a major hurricane may not affect a region for fifty years, but if the odds have changed then in order to get insurance, you will have to be willing to pay the price of the increased risk.
In some of the islands, especially the US Virgin Islands and Antigua, hoteliers were unable to get insurance at all, so they established a fund which was expected to cushion them in the event of a catastrophe. Sadly, the fund was not properly developed before they were struck by hurricane Marilyn.
Aquing said this situation may be a pointer for the start of another set of rate increases in the region. Though to some extent, Trinidad based insurers might be spared.
In the early 1990s regional rates were raising at almost 100 percentage points. Trinidads rates never rose that fast. We may not be as bad as Port Royal in Jamaica, but a lot of the development in Trinidad is on alluvial soils which is very susceptible to earthquakes.
And, apart from hurricanes and other types of disasters, Trinidad is located in a very active earthquake zone.
So the risk comes in all forms and is shared around the region. In Florida there are floods, volcanic activity in St Vincent, mud slides in Mexico and all types of other disasters from around the region.
Scientists are also saying that what we are experiencing today may only be the tip of the iceberg and this is the beginning of a very active time for the weather system.
"It may force re-insurers to re-assess their positions as the losses may be too much to bear," he said.
On the other hand, Aquing said the industry has benefited from the softening of prices around the region.
In the US Virgin Islands insurance was going at around $60 per $1,000 insured. When you compare this with the rates in Trinidad of about $6 per $1,000 insured, you see the risk may be greater, but there is also the potential of earning large revenues... if things work out.
There are also new opportunities. With 60 percent of construction blown away, new and current home owners may be willing to pay even more for the added protection... and unlike the houses in Trinidad you are insuring houses which are built with superior structural designs and materials. The tourism industries in these areas will also have to re-evaluate their options. It is difficult to sell rooms in a hotel which is'nt near the sea.
But being near the sea puts you at even greater risk of damage from storms, high waves, wind and even soil erosion. The tourist visiting the northern and eastern Caribbean like to have the sea at their door when they wake in the morning.
As a result, structures along the seashore will be more susceptible to rate hikes than those further inland.
These hoteliers will have to get together and establish a disaster fund to protect their investment, as the high rates may still be insufficient for insurers. The key to survival both for insurers as well as those seeking insurance, is to manage their capital closely and weigh the different risks involved against the potential returns on their investment.