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Reinsurers to review earthquake risk rating

Published:Friday | February 5, 2010 | 2:00 AM

Dwight Bellanfante, Gleaner Writer





Left: Dr Parris Lyew Ayee says areas east of Trelawny and Manchester are particularly at risk of a mega quake. Right: Chris Hind says the Haiti temblor could be a game changer in terms of earthquake risk ratings. - Photos by Ricardo Makyn/Staff Photographer

Local general insurers are working with international reinsurers in reviewing the weighting given to earthquakes in assessing the risk to commercial and residential buildings.

The move was prompted by a slew of powerful earthquakes in Latin America and the Caribbean last month, the worst being a January 12 magnitude 7.0 tremor which struck Haiti, killing more than 150,000 persons and displacing at least one million.

General manager of NEM Insurance Company, Chris Hind, disclosed during a Gleaner Editors' Forum Tuesday that the earthquake which devastated Port-au-Prince and surrounding areas had significant consequences for Jamaica, which is located along the same Enriquillo-Plantain Garden fault line, thus making it vulnerable to quakes of a similar magnitude.

"Based on the weighting allocated, earthquake risk could, therefore, be revised upwards from the current industry standard, which is 60 per cent, split between windstorms and earthquakes, to which the region is particularly vulnerable.

"The highest risk factor is fire, which is approximately 40 per cent of the weighting," Hind said.

Reinsurance critical

He argued that reinsurance was critical, as local funding only covered a small fraction of cost, and companies like NEM were careful to secure enough reinsurance to ensure they could pay out claims. Such reinsurance coverage is provided by international reinsurance entities such as Lloyd's of London in the United Kingdom, and United States-based companies.

Hind also estimates that most residential property in Jamaica is uninsured against disaster, with the aggregate sum insured valued about $300 billion-$350 billion, while aggregate premiums are worth approximately 0.8-1.0 per cent of that amount.

Rates for commercial property, he said, were not feasible to estimate as the majority is placed overseas.

Hind sought to assure that premiums to local policyholders were not likely to rise soon in response to the reassessment of the reinsurance rating, as premiums are calculated annually by individual agencies and he does not foresee a major shift industrywide.

Meanwhile, Dr Parris Lyew Ayee, geoinformatics expert at the University of the West Indies, Mona, alerted the forum to studies indicating that areas east of Trelawny and Manchester were vulnerable to a 7.0 temblor, while areas west of Trelawny and Manchester were likely to experience a quake below that Richter scale reading.

dwight.bellanfante@gleanerjm.com