The prices for property insurance are expected to stabilise with only a small probability of a slight increase according to Nigel Twohey, Marketing Director for Island Heritage.

"The biggest factors are the number of storms, not just for the Cayman Islands, but throughout the Gulf Coast and the Caribbean," said Mr Twohey.

"So far the hurricane season has been pretty quiet. Meteorologists have downgraded their predictions of the number and strengths of the storms in the Caribbean and the Gulf States so there will not be as many anticipated.

"We don't wan to get hit so the prices will settle down more. After that hope we the prices will get better."

According to Mr Twohey, property insurance rates jumped from an average of 1 percent of replacement cost of a house before Hurricane Ivan to around a high of 2.5 percent. This is due to the fact insurance companies must also buy reinsurance in case of a widespread catastrophe like that experienced with Hurricane Ivan, Mr Twohey said.

He explained that property insurance rates are now settling down to an average of 2 to 2.25 percent.

One reason Mr Twohey expects property insurance rates to stabilise is the meteorologist experts at Colorado State University (CSU) have downgraded their earlier predictions on storm activity for this hurricane season.

Originally, CSU predicted there would be 17 named storms with five hurricanes predicted as category three or above. That prediction has changed to 15 names storms, with three intense hurricanes being category three or above.

According to CSU's report - it expects an active hurricane season for the Atlantic basin but not nearly as active as 2004 and 2005.

In a previous interview with Island Heritage, CEO, Bryan Murphy, noted that the active hurricane season in 2004 and especially with in 2005 in the Caribbean region has put upward pressure on property insurance rates.

"Hurricanes Katrina, Rita and Wilma had well over US$100 billion in damages to insurance and reinsurance companies," said Mr Murphy.

"Hurricane Ivan was minor compared to what happened in the aftermath of Katrina."

Mr Murphy explained that even if this country escapes hurricane activity in the region it will impact on all rates.

"You can't expect the industry not to react to losses of this nature.

Although they did not affect Cayman, it will impact the cost of insurance around the world."

He explained the US Virgin Islands and the Cayman Islands have the highest property insurance rate in the Caribbean. Nevertheless, because the rates in this country already increased substantially as a result of Hurricane Ivan, it is not realistic to expect the rates to increase so it is likely that other islands in the Caribbean will see higher rate increases.

According to Mr Twohey, one of the lessons learned from Hurricane Ivan is that houses need to be re-valued on a periodic basis to make sure the level of insurance matches the property.

Another factor that may affect the cost of re-insurance is that the amount of construction predicted may exceed the reinsurance maximum purchased by insurance companies doing business here.

He explained that most insurance companies purchase reinsurance in the early part of the years.

However, if construction of new buildings exceeds the amount of reinsurance purchased, the insurance company has to go out and buy additional reinsurance in the middle of the year.

Buying reinsurance in the middle of the year may be less cost-competitive and drive up insurance rates.

The deadline for comments from the draft amendments to the insurance law was 28 July and according to Mr Twohey, who was also part of the working group, there were no significant contributions from the industry on the proposed law.

"The private sector was consulted during this whole process, so there was general support for the recommendations," he stated.

Two key recommended changes to the law are,  tightening the deposits for foreign insurance company with CIMA, and the second key recommendation concerns how businesses conduct themselves with consumers.

Although Mr Twohey did not specifically discuss the Jamaica-based Dyoll insurance firm going bankrupt, many Cayman policyholders were left holding all the bills when the insurance company went under when it could not meet its claims after Hurricane Ivan.

Furthermore, there are still ongoing legal proceedings about whether Cayman policyholders will receive an equal share of the remaining assets or if they will only be paid to policyholders living in Jamaica.

shurna@caymannetnews.com