Haiti’s private insurance market is very small but its government did provide a level of insurance coverage to its citizens by participating in a regional risk sharing pool.
“Haiti is the poorest country in the Western Hemisphere and poor countries tend to purchase very little property insurance coverage,” said Dr. Robert P. Hartwig, president and economist for the Insurance Information Institute (III). “The fact that there is very little information about Haiti’s private insurance market suggests that the market is very small—likely not more than a few tens of millions of dollars.”
Consequently, he said, private insurer losses from the 7.0 temblor on Tuesday, Jan. 12, will be modest and will not have a material impact on global insurance and reinsurance markets.
Beyond earthquakes, Haiti faces a litany of challenges including frequent hurricanes, severe floods, landslides and mudslides, poor public safety infrastructure and the fact that the country has a history of political and civil unrest, noted Hartwig.
Hartwig said that some multinational firms with facilities in Haiti may be insured for losses under blank policies that respond to losses wherever in the world they occur.
A December 2009 report by Axco Insurance Information Services on Haiti’s non-life (property/casualty) market, said, “Some 90% or more of Haiti’s insured risks are situated in Port-au-Prince, but no information is available about aggregate sums insured.” In the absence of official data, Axco estimated the total non-life premium income written in Haiti at $19 million in 2008, with the non-life category consisting primarily of P/C policies for auto, homeowners and commercial insurance.
The extraordinary loss of life and property damage in Haiti this week is already drawing comparisons to earthquake in southwestern China in May 2008, a natural disaster that killed 87,449 people, according to Swiss Re. As is the case with Haiti, China had little private insurance coverage to offset the severe economic damage the nation incurred. Swiss Re estimated that the Sichuan Province quake generated $366 million in insured losses, even though the overall economic damages to China as a whole were equal to $125 billion.
The risk sharing pool, Caribbean Catastrophe Risk Insurance Facility, is offering support to the people of Haiti. Haiti’s government, as one of 16 nations in the CCRIF, will receive just under $8 million from the CCRIF based on its initial assessment of the earthquake’s location and severity.
The CCRIF was created to limit the financial impact of catastrophic hurricanes and earthquakes to Caribbean governments by quickly providing short term liquidity when a policy is triggered. The policy was renewed this past June. Besides Haiti, there are 15 other members of the CCRIF: Anguilla, Antigua & Barbuda, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Dominica, Grenada, Jamaica, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Trinidad & Tobago, and the Turks and Caicos Islands.
Source: Insurance Information Institute
Was this article valuable?
Here are more articles you may enjoy.