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PORT-AU-PRINCE, Haiti—Despite widespread devastation and a six-figure death toll from the magnitude 7.0 earthquake that struck Haiti last week, insured losses likely will be a fraction of economic losses, industry sources say.
While the Caribbean nation's private insurance market is small, Haiti's government will receive an $8 million capital infusion from the Caribbean Catastrophe Risk Insurance Facility, a pool the World Bank set up in 2007 to provide economic stability for the catastrophe-prone region.
Although insurers were not paying sizable claims stemming from the catastrophe, many made donations to help the impoverished nation rebuild from its worst quake in more than 200 years (see box).
Meanwhile, many businesses that operated on Haiti were focusing on locating and ensuring the safety of their employees before assessing damage.
Although it did not provide an insured damage estimate, Oakland, Calif.-based catastrophe modeler EQECAT Inc., a subsidiary of ABSG Consulting Inc., projected total economic damage from last Tuesday's earthquake would reach the “low-single-digit billions” of dollars, up from its initial estimate of “hundreds of millions” of dollars.
Late Friday, a Haitian official reportedly said that 40,000 bodies already had been buried and the death toll could reach 140,000.
Because Haiti is the most impoverished country in the Western Hemisphere, its insurance market is not very developed, said Nikhil da Victoria Lobo, vp for Swiss Reinsurance Co.'s public sector team based in New York. Swiss Re is the lead reinsurer for CCRIF.
“In Haiti, one of the challenges has been distribution,” said Mr. da Victoria Lobo.
London-based Axco Insurance Information Services Ltd. estimates that total nonlife insurance premiums in Haiti amount to less than $20 million annually, and that earthquake insurance penetration is extremely low.
Munich Reinsurance Co. put its exposure at up to a low-double-digit millions of dollars figure.
The insurance through CCRIF will provide a revenue stream for the government to continue operating after the disaster, said Simon Young, supervisor of the pool in which 16 Caribbean governments participate.
Although it is the largest claim paid to date by CCRIF, the facility will not be financially impaired by the event, said Mr. Young, who noted that it would pay the $8 million from its reserves without tapping its reinsurance coverage.
CCRIF paid out nearly $1 million to the governments of the Dominican Republic and St. Lucia in a November 2007 earthquake in the eastern Caribbean. CCRIF paid $6.3 million to the Turks & Caicos islands after Hurricane Ike made a direct hit on Grand Turk in 2009.
The magnitude 7.0 quake in Haiti toppled hundreds of buildings in Port-au-Prince, including the presidential palace, local offices of the World Bank and United Nations, hotels, a hospital and the university, according to the London arm of catastrophe modeling firm Risk Management Solutions Inc.
Many buildings in Haiti were constructed “with poor building materials that are not properly reinforced,” said Guillermo Franco, senior research engineer at AIR Worldwide Corp. in Boston.
“Another type of exposure is commercial or industrial facilities, power plants, water distribution facilities. Those are a bit trickier to gauge whether they've undergone damage,” Mr. Franco said, adding that any private insurance coverage that exists most likely would be restricted to these facilities.
Willie Sanchez, head of procurement for Miami-based Golden Crown Produce Inc., which imports mangoes from Haiti, last week said he was unable to ascertain the extent of damage to the company's packing plant on because he could not reach any suppliers in Haiti. He said Golden Crown Produce is insured gave no details.
Digicel Group, a cellular company with 2 million subscribers in Haiti, said its communications infrastructure incurred some damage but still was operational. The company, a client of Caribbean Risk Managers Ltd., which manages the CCRIF, did not respond to requests for insurance information.
Fort Worth, Texas-based American Airlines Inc. said it was sending aid into Haiti to help its more than 100 employees who work at Toussaint Louverture International Airport and to help hospitals in Port-au-Prince.
Miami-based Royal Caribbean Cruises Ltd. reported that the buildings, pier and attractions at its private beach on the northern coast of Haiti were undamaged and that it would resume stops on the island this week to bring relief supplies.
“Royal Caribbean wants to do its part to help out not only the general response, but also our hundreds of Haitian employees and their families through this disaster,” company Chairman and CEO Richard D. Fain said in a statement.