Claudia Gardner, Hospitality Jamaica Writer:

With some of the worlds largest re-insurers contemplating shedding risks of natural disaster insurance in some coastal areas in the United States, tourism interests in Jamaica and the Caribbean are currently taking steps in preparation for a similar fate.

President of the Jamaica Hotel and Tourist Association, Horace Peterkin says he is optimistic that the Caribbean's tourism industry will not be severely affected, as mitigation plans are already being put in place by the industry's governing bodies.

"Some larger companies have started to self-insure. The Caribbean Hotel Association (CHA) is actually looking at getting hotels to buy into a group insurance scheme," he told Hospitality Jamaica.

focusing on smaller properties

Over 900 hotels are a part of the CHA, which could provide the scale needed to do this, he said. Accordingly, the CHA is focusing on smaller properties, which may not be able to self-insure.

"In fact, some hotels I know of have taken the decision not to insure with particular insurance companies which have escalated their prices for insurance coverage and have decided to self-insure instead," he revealed.

Reports out of Germany reveal that the world's largest re-insurers Munich Re has proposed to reexamine its coverage of properties within 300 metres of the shoreline in disaster-prone countries, citing "the effects of climate change such as higher frequency of intense storms" as factors giving rise to the measures.

A joint publication on the 2005 hurricane season, released this year by Munich Re and its affiliate US-based re-insurers American Re, stated that, "In 2005, the hurricanes in the Atlantic broke all meteorological and monetary records - one more reason to examine the risk in even greater detail in the future.

And although the insurance industry worldwide has managed to cope with the record losses of the past year, the ability to provide cover for natural hazards in the future will depend on the development of adequate insurance solutions for catastrophe scenarios that have hitherto been considered inconceivable - we have to think the unthinkable," the report said.

noticeable dent in insurers' balance sheets

"Hurricanes Katrina, Rita, and Wilma made a noticeable dent in many insurers' balance sheets in 2005. In conjunction with the losses from Charley, Ivan, Frances, and Jeanne, the 'Fab Four' tropical cyclones of the previous year, they made it clear that the hurricane hazard must be completely re-evaluated," the report noted.

Munich Re and American Re paid a record US$30 billion for losses caused by hurricanes in 2004, especially in the United States and the Caribbean, a figure which more than doubled in 2005 when losses skyrocketed to US$ 83 billon. It said the time has come for a radical rethinking of how hurricane risks are evaluated.

"There is no doubt that the models used to simulate the hurricane risk in the North Atlantic need adjusting," the report said. "New loss distributions will consequently affect all its business processes - from the calculation of the risk price, to the calculation of the required risk capital, and to profit-oriented portfolio management. The results of re-evaluating the risk will vary from portfolio to portfolio. But one thing is certain: the adjustments required of all risk carriers will be substantial."

The report said the onus is on the insurance industry to incorporate in its risk management of all the findings on the hurricane hazard, the loss potentials of storm surges and floods, and the factor of vulnerability.

"The decisive factor, however, will not simply be creating adjustment processes but also implementing them rigorously. Because the next storm is sure to come," it said