NASSAU, BAHAMAS — The purchase of insurance for public sector infrastructure should be further considered and the culture of insurance should be promoted, the Inter-American Development Bank (IDB) has recommended in a new report.
A newly released 218 page report titled, “The Assessment of Affects and Impacts of Hurricane Dorian in The Bahamas” noted that financial protection should begin starting with new public works.
“For this, it is important to conduct negotiations with private insurance companies to include costs that the government would incur when buying this service,” the report stated.
“This policy is followed in other countries, such as Ecuador, where the purchase of insurance for public infrastructure is mandatory.
Government has historically chosen to repair damaged infrastructure rather than take out insurance coverage.
The IDB also noted that while most large business were well insured, many small and micro-enterprises were not insured or were underinsured.
“As insurance is a key factor in the financial protection pillar, efforts should be made to increase insurance penetration, both for property and loss of business,” the bank continued.
“In 2018, the government removed the VAT requirement from homeowners’ insurance; something similar can be done for small and micro enterprises. While discussion with The Bahamas Insurance Association revealed that this measure has not yet significantly increased insurance penetration among homeowners, witnessing the level of devastation left by Hurricane Dorian may influence both homeowners and small business owners to increase their coverage.”
It further noted that another suggestion which has arisen in discussions was the possibility of government subsidizing insurance for homeowners and small businesses.
“While this would increase the government’s annual expenditure, it may reduce the total relief expenditure in the event of another disaster. Besides direct subsidies, the government could also promote business associations and support their requests for group insurance and rates,” the IDB stated.
Hurricane Dorian made landfall on Abaco on September 1, 2019, with maximum sustained winds of 185 mph and wind gusts over 220 mph.
According to the Department of Meteorology, the storm surge provoked storm tide of 20 to 25 feet.
On September 2, the eye of Dorian moved over the eastern side of Grand Bahama and drifted across the island as a Category 5. The hurricane then stalled over Grand Bahama for another day, finally pulling away from the island on September 3.
The estimated damage from the monster storm is pegged at $2.5 billion, of which nine percent is public and 91 percent private.
According to the report, Abaco suffered 87 percent of the damage and Grand Bahama 13 percent.
“Losses are estimated as $717.3 million and were sustained primarily in the private sector, which accounted for 84 percent of the total,” the bank stated.
“Additional costs add up to $220.9 million, 46.4 percent of those costs were in the environment sector and are associated to the cleaning of the oil spill. A major part of the remainder of the additional costs is related to debris removal and demolition.”