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Caribbean ‘vacation’ for CAT claims

As a global forensic accounting firm, we at MDD have a “boots on the ground” mentality when it comes to quantifying economic damages for catastrophe (“CAT”) claims. The busy hurricane season in 2017 meant that I, along with many of my colleagues, spent considerable time working in the Caribbean this past year assessing time element/business interruption and stock losses, along with the audit and tracking of physical damage costs.

For me, a stay in the Caribbean usually entails a break from everyday life and is filled with unlimited sunshine, relaxing on the beach and perhaps the enjoyment of a few adult beverages! However, this year my 10-week Caribbean “vacation” consisted of trying to help get many tourism-dependent economies back on their feet by assisting their insurers quantify their losses.

We faced numerous logistical challenges in travelling to and from the loss locations including avoiding Maria following Irma.

We also ran across some interesting coverage issues. Some of the interesting twists we faced included:

  • As raw materials are not manufactured locally, we saw a significant surcharge in construction costs following the hurricanes due to an increase in Caribbean demand and a decrease in American supply (due to work required in the US from Harvey and Irma). This raised the question: what is the replacement cost value to be used when considering the value at risk for co-insurance requirements? The actual cost of reconstruction post-CAT may drastically exceed the cost of the very same labour and materials under non-CAT circumstances.
  • BI policies often include a “loss of market” exclusion, and when assessing BI claims it was important to understand the impact that the loss had on the physical property as opposed to more the more general impact it had on the tourism market.

The World Economic Forum conducts an annual survey of its community of experts, and compiles a Global Risk Landscape for the upcoming year. Their 2018 survey lists Extreme Weather Events and Natural Disasters as the top two risks in terms of likelihood, so it’s clear that the global community has a pulse on climate change and its impact on CATs.

So whether it’s this year or next, when the cousins of Harvey, Irma and Maria come knocking, MDD will be close behind.

Cameron McQuaid, CPA, CA, CFF is a Senior Manager in the Toronto office of MDD.

By Cameron McQuaid. Published in Insurance People – July 2018

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