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HomeNewsArchivesINSURANCE INDUSTRY TO AIR CONCERNS WITH JAMES

INSURANCE INDUSTRY TO AIR CONCERNS WITH JAMES

March 28,2001 — Against the backdrop of skyrocketing insurance costs and fears that insurance availability will soon dry up, Lt. Gov. Gerard Luz James II, Insurance commissioner, and Maryleen Thomas, director of Banking and Insurance, will meet Thursday with members of the industry.
David Ridgway, president of the Virgin Islands Insurance Association, which represents local insurance agents, said Wednesday, "Some of our members have seen shrinkage" in the amount of insurance available. But he was not ready to call the situation a "crisis" as it was labeled by the St. Croix Chamber of Commerce earlier this week.
Carmelo Rivera, president of the St. Croix Chamber of Commerce, said "during the last few months, we have become aware that many business and homeowners have experienced problems with renewing existing policies or procuring new casualty coverage."
Property casualty insurance coverage is "extremely limited" according to the chamber statement. Home insurance is "scarcely available" and rates for business coverage are increasing by 20 percent to 40 percent.
Ridgway said he could not confirm the chamber's numbers concerning percentage increases, noting that an increase "varies on the risk" involved. And he stressed he does not believe homeowners are affected as much as commercial property owners.
"I'm not sure we can measure just how bad it is yet," Ridgway said. One reason is that insurance agents (and customers) typically learn about changes when it comes time to renew a policy, and those renewals are staggered. Another is that agencies are competitors and reluctant to share too much information with one another.
But there is a problem and industry representatives are blaming it primarily on the increased cost of reinsurance – a kind of insurance for insurance companies.
"Reinsurance is what is driving everything," said attorney Henry Feuerzeig, the representative for Lloyds of London in the territory. He estimated that Lloyds' syndicates manage between 55 percent and 60 percent of the insurance in the Virgin Islands. Other companies "just don't want the risk." In fact, he said, "there is a reluctance to write (insurance) anywhere in the Caribbean" because of extensive property losses caused by natural disasters in recent years.
He quoted a report from Moody Investment Services saying Lloyds lost 3.5 billion pounds (or roughly $5.25 billion) over the last four years.
In some cases the cost of reinsurance has increased as much as 50 percent, Feuerzeig said. Some underwriters are unwilling to pay that cost so they are choosing to place the capacity they have in safer markets.
Ridgway and John Harper, who handles public relations for the V.I. Insurance Association, agreed that reinsurance costs are driving the market. Not only is the Caribbean share smaller, so is the Virgin Islands portion of that share, Harper said.
Ridgway said the Virgin Islands had been getting a greater share of the business placed in the Caribbean because it was paying higher premiums in general than neighboring jurisdictions. But other islands have recently seen increases for coverage of as much as 50 percent to 100 percent and "now they're catching up." The result is "the spread (between the cost of insurance here and elsewhere) has shrunk, which makes us less attractive."
The industry in the Virgin Islands is driven largely by worldwide forces over which the territory has no control. For the most part those forces are out of our hands, Feuerzeig said.
However, Ridgway said the government can help by speeding up the approval process for new insurance companies that seek to do business in the territory — thus increasing capacity — and by expediting requests from existing companies to make changes in their rates and/or coverage, such as raising the deductible.
"We as an association very much support a free market approach," he said.
"Each agent is working very hard on their own behalf" to get the best deal to offer to customers, Harper said. That means the industry is working to bring prices down.
"It's a fluid process," Harper said. "We all hold out hope that a company or two will come in to relieve the problem."

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March 28,2001 -- Against the backdrop of skyrocketing insurance costs and fears that insurance availability will soon dry up, Lt. Gov. Gerard Luz James II, Insurance commissioner, and Maryleen Thomas, director of Banking and Insurance, will meet Thursday with members of the industry.
David Ridgway, president of the Virgin Islands Insurance Association, which represents local insurance agents, said Wednesday, "Some of our members have seen shrinkage" in the amount of insurance available. But he was not ready to call the situation a "crisis" as it was labeled by the St. Croix Chamber of Commerce earlier this week.
Carmelo Rivera, president of the St. Croix Chamber of Commerce, said "during the last few months, we have become aware that many business and homeowners have experienced problems with renewing existing policies or procuring new casualty coverage."
Property casualty insurance coverage is "extremely limited" according to the chamber statement. Home insurance is "scarcely available" and rates for business coverage are increasing by 20 percent to 40 percent.
Ridgway said he could not confirm the chamber's numbers concerning percentage increases, noting that an increase "varies on the risk" involved. And he stressed he does not believe homeowners are affected as much as commercial property owners.
"I'm not sure we can measure just how bad it is yet," Ridgway said. One reason is that insurance agents (and customers) typically learn about changes when it comes time to renew a policy, and those renewals are staggered. Another is that agencies are competitors and reluctant to share too much information with one another.
But there is a problem and industry representatives are blaming it primarily on the increased cost of reinsurance – a kind of insurance for insurance companies.
"Reinsurance is what is driving everything," said attorney Henry Feuerzeig, the representative for Lloyds of London in the territory. He estimated that Lloyds' syndicates manage between 55 percent and 60 percent of the insurance in the Virgin Islands. Other companies "just don't want the risk." In fact, he said, "there is a reluctance to write (insurance) anywhere in the Caribbean" because of extensive property losses caused by natural disasters in recent years.
He quoted a report from Moody Investment Services saying Lloyds lost 3.5 billion pounds (or roughly $5.25 billion) over the last four years.
In some cases the cost of reinsurance has increased as much as 50 percent, Feuerzeig said. Some underwriters are unwilling to pay that cost so they are choosing to place the capacity they have in safer markets.
Ridgway and John Harper, who handles public relations for the V.I. Insurance Association, agreed that reinsurance costs are driving the market. Not only is the Caribbean share smaller, so is the Virgin Islands portion of that share, Harper said.
Ridgway said the Virgin Islands had been getting a greater share of the business placed in the Caribbean because it was paying higher premiums in general than neighboring jurisdictions. But other islands have recently seen increases for coverage of as much as 50 percent to 100 percent and "now they're catching up." The result is "the spread (between the cost of insurance here and elsewhere) has shrunk, which makes us less attractive."
The industry in the Virgin Islands is driven largely by worldwide forces over which the territory has no control. For the most part those forces are out of our hands, Feuerzeig said.
However, Ridgway said the government can help by speeding up the approval process for new insurance companies that seek to do business in the territory -- thus increasing capacity -- and by expediting requests from existing companies to make changes in their rates and/or coverage, such as raising the deductible.
"We as an association very much support a free market approach," he said.
"Each agent is working very hard on their own behalf" to get the best deal to offer to customers, Harper said. That means the industry is working to bring prices down.
"It's a fluid process," Harper said. "We all hold out hope that a company or two will come in to relieve the problem."