The Central Bank of The Bahamas (CBOB) says the “unprecedented devastation” caused by Hurricane Dorian when it made landfall in the northern islands of the archipelago will negatively impact the local economy in the short term.
The Bahamas Insurance Association (BIA) Friday gave a commitment to settling claims “fairly and in the most expeditious manner”.
Dorian, considered one of the worst storms in modern times, lashed the country on September 1 with winds in excess of 180 miles per hour (mph). The death toll has so far been put at 30 and government has warned Bahamians to be prepared for a “staggering” figure as rescue teams search Abacos and Grand Bahamas, the two islands hardest hit by the storm.
The CBOB said also that disruption in travel itineraries to many airports during this period, will also negatively impact the economy in the short term.
“Rebuilding efforts in the aftermath of the storm and the return to normal conditions in several tourism markets which were not severely impacted, will temper these overall adverse effects. The pace of recovery of hotel room inventory will impact the speed at which the economy returns to normal.”
The CBOB has since announced a temporary relaxation of lending guidelines to domestic banks to facilitate access by households and businesses to credit facilities in the affected islands for relief purposes.
In this regard, banks are advised that in respect of hurricane relief facilities, the mandatory 15 per cent equity contribution will not apply and that the threshold debt service ratio of 40 to 45 per cent is waived for distressed borrowers.
It said banks may adopt flexible but prudent arrangements in line with borrowers’ financial capacity.
The CBOB said that in the coming months, the measures implemented to rebuild and replace vital infrastructure, combined with efforts to assist those residents and businesses adversely affected by the storm, could hamper the government’s fiscal position.
“However, financing needs are likely to be met in part by inflows from several multilateral lending facilities, thereby mitigating the pressure on domestic funding sources,” the CBOB noted.
“In the private sector external re-insurance inflows are anticipated to cushion business and household financing needs, however recovery gaps are likely for impacted persons and entities without adequate insurance protection,” the CBOB said, in its monthly economic and financial developments report for July, noting also that the “medium-term growth prospects are still positive for The Bahamas.
“However, the unprecedented devastation caused by Hurricane Dorian to the northern islands of The Bahamas and the disruption in travel itineraries to many airports during this period, will negatively impact the economy in the short-term.”
“The hurricane’s near-term impact on external reserves will materialize over the remainder of 2019 and most of 2020. Balances could still experience a net accumulation in 2019, as re-insurance and other external proceeds are placed on deposit for drawdown during rebuilding efforts. More of the net outflows against reserves are anticipated over the course of 2020, cushioned by the seasonal upturn in performance on other tourism assets. Nevertheless, reserve indicators are expected to remain above international benchmarks.”
Meanwhile, the BIA has sought to give the assurance to policy holders that it is committed to settling claims “fairly and in the most expeditious manner.
“In the wake of Hurricane Dorian, The Bahamas Insurance Association extends thoughts and prayers to all those impacted during this extremely difficult time. We extend condolences to the family and friends of those who have lost loved ones,” the BIA said in a statement.
“We embrace our role as an industry with a critical role to play in the recovery and restoration of the affected islands and wish to assure the public that the insurance sector is ready and positioned to meet our contractual obligations to our clients.”
The BIA said that its industry partners, including insurance adjusters and catastrophe response experts, have been engaged and are on standby in Nassau, in Florida and in the region.
“Following the ‘all clear’ and with the coordination of the relevant authorities on the ground, teams will be deployed as soon as possible to begin assessments,” the BIA said, adding that “the days and months ahead will be difficult for all.
“The BIA remains committed to working through this crisis with our clients and to doing all that we can to settle claims fairly and in the most expeditious manner possible, given these dire circumstances,” it added.