Bahamas Real Estate
News & Information
Insurance Policies in The Bahamas
Revised by Star General Insurance
Insurance in The Bahamas is as much a necessity as in other parts of the world. Banks require various kinds of insurance to finance purchases of buildings, equipment, motor vehicles, boats, business interests or other material things.
SECURITY
If one were interested in buying a house, the bank manager would normally ask one to provide satisfactory security in the form of a mortgage over the property and building, backed up by life insurance to cover the full amount of the loan and insurance on the building, with both policies endorsed to pay any losses arising to the bank. Similar requirements apply to other purchases for which one must borrow money.
The Bahamas covers quite a large area, but much of the Commonwealth is under water, with some 700 islands, cays and rocks spotted over an area of some 15,000 square miles. Consequently, the number of houses, businesses, motor cars, vessels and aircraft is relatively few in number compared to our big neighbour to the west, Florida, and her other sister states. This sparsity in numbers means that the volume of insured risks is small and the overall premium base for The Bahamas is minuscule compared with the world insurance markets. (Insurance premium income for the whole of The Bahamas, the Caribbean Islands and Central America has been reported as being only one 15th of one percent of premiums payable worldwide, whereas the cost of claims for the region is about 2.5% of worldwide losses.)
Premium rates, therefore, may be somewhat higher than those available for similar risks in Florida or the states to the north, but their premium base is vast in comparison to ours. Nevertheless, coverage available from insurers is quite sophisticated and very much in line with what is available elsewhere in the world.
FIRE & HOUSEHOLD
Fire and household policies will all contain the "Pro Rata Condition of Average" (commonly called the "Average Clause"), which requires the policy holder to insure for full values if he wishes to receive "full value" for any claim made for loss or damage caused by an "Insured Peril". Reinstatement, public authorities, and a variety of other clauses amending and/or extending the standard policy coverages are available. The possibility also existed that full cover from windstorm may not have been available to all properties to be insured. With the visit of Hurricane Andrew in August 1992 and Hurricane Floyd in September 1999, the Bahamas could no longer claim to be "specially" favoured, as the last serious hurricane to hit major inhabited areas of The Bahamas previously was in 1929.
CATASTROPHIC PERILS
Because of a variety of factors, primarily the cost of reinsurance protection purchased by primary (or direct) underwriters who retail insurance to the general public, the inclusion of any of the "perils of Hurricane, Windstorm, Earthquake or Tidal Wave" (known as "catastrophe perils"), puts premium costs at the top level of the rates agreed by underwriters participating in the local market.
PROPERTY RATES
Building codes in The Bahamas are of a very high standard. This is one reason why our premium rates for property insurance are less than those charged in the Caribbean.
Market rates in 1999, for full cover on a typical building constructed of concrete and roofed with wood or fibre-glass shingles in New Providence equal 0.80% on buildings and 1.10% on contents. In the Family Islands: buildings-1% and contents-1.35%. Therefore, the premium on a building in New Providence valued at B$100,000 with contents of B$25,000 would be B$1,075.00 or B$1,337.50 in the Family Islands. A building valued at B$500,000 with contents of B$50,000 in N.P. would have a premium of B$4,550, or B$5,675 in the Family Islands. In practice, however, premiums of B$1,000(N.P)/B$1,250(Fam. Is.) and B$3,675(N.P.)/B$4,600(Fam. Is.) respectively, could be obtained. A shop retailing non-hazardous merchandise in a similar building with similar sums insured will attract a similar premium on the same values. Wooden buildings attract higher rates of premium throughout the Bahama Islands.
Hurricane Floyd proved that beachfront and Family Island properties are clearly at higher risks, thus it can be expected in the new millennium that premiums for these properties may increase by 10-15%.